Adnoc Drilling set to raise up to $751m from Abu Dhabi listing

The drilling subsidiary of Abu Dhabi National Oil Company expects to raise approximately Dh2.76 billion ($751 million) from the planned initial public offering of 7.5 per cent of its shares.

Adnoc Drilling has set the price of its Abu Dhabi listing at Dh2.30 per share, implying an equity value of $10 billion, the energy company said in a statement on Monday.

The subscription period for the offer opens today, September 13, and will close on September 23 for UAE retail investors and on September 26 for qualified domestic and international institutional investors.

Adnoc Drilling shares are expected to start trading on the Abu Dhabi Securities Exchange on October 3.

The selling shareholder, Adnoc, and its drilling subsidiary have seen "strong initial demand indications from both local and international investors, ahead of the start of the subscription period", the company said.

The offer price per share provides investors with "a highly attractive value proposition" and is also reflective of Adnoc's "prioritisation of a supportive aftermarket performance post-listing", the statement added.

Adnoc announced the intention to float shares in its drilling company on the ADX last week.

US energy services company Baker Hughes, which has a 5 per cent stake in Adnoc Drilling, will retain its shares. Adnoc will remain the majority shareholder following the initial public offering.

"The offer price of Dh2.30 per share, seems very attractive as it comes closer to 18 times annualised PE [price-to-earnings] multiple and 4.5 times price-to-sales multiple," said Hettish Karmani, research head at Muscat-based U Capital.

The PE multiple is an indicator of a company’s shares price relative to its earnings.

Adnoc Drilling's share price is at a discount to the market, which is currently trading at a PE ratio of 24 times, he added.

The company’s has “maintained robust funds from operations” in the last three years and it is expected “to deliver consistent dividends and attractive returns to the shareholders”, Mr Karmani said.

The share offer is available to individual and other investors, Adnoc Group employees and retirees of the national oil company as part of the retail offering, as well as to qualified international investors. Five per cent of the offer is reserved for the Emirates Investment Authority.

Adnoc Drilling is one of the largest drilling companies in the Middle East, operating 107 onshore, offshore and island rigs, of which 11 are rented. The company, which began operations in 1972, has expanded its fleet of rigs, adding 67 since 2010, in line with the growth in oil and gas production capacity at Adnoc.

This is the second IPO for the Adnoc Group, which listed 10 per cent of the company's distribution business in 2017. Adnoc doubled the amount of its free-floating stock to 20 per cent in September last year following a block placement of 1.25 billion shares, valued at $1 billion, with institutional investors.

The listing of Adnoc Drilling's shares will raise the free float market cap of the ADX by $750m and add $10bn to the market cap, equivalent to 2.6 per cent of the total market cap of ADX, Jaap Meijer, managing director, head of equity research at Arqaam Capital, said last week.

The ADX has outperformed the regional markets, rising more than 50 per cent since the beginning of this year, which has pushed its market capitalisation to more than Dh1.38 trillion ($375.76bn).

This is the second major listing this year in Abu Dhabi.

In July, Al Yah Satellite Communications (Yahsat), a unit of Mubadala Investment Company, raised Dh2.68bn ($730m) through a public offering.

The company sold 975.9 million, or 40 per cent, of its shares through the IPO.

The record performance of the ADX and the continued economic recovery has encouraged several Abu Dhabi-owned enterprises to consider share floats.

Mubadala Investment Company-owned Emirates Global Aluminium, the biggest company in the UAE outside of the hydrocarbons sector, indicated that it is considering a listing after it reported its strongest half-yearly results this year.

Last week, ADQ, one of the region’s largest holding companies, said it plans to list Abu Dhabi Ports Company on the bourse.

The listing of the company, which operates ports, industrial cities, and free zones in Abu Dhabi, is expected to take place before the end of this year, subject to market conditions and regulatory approvals, ADQ said at the time.