Adnoc Drilling JV to acquire additional stake in US tech company for $270m

A joint venture between Abu Dhabi's Adnoc Drilling and Alpha Dhabi Holding has agreed to increase its stake in US-based oil engineering company Gordon Technologies for $270 million, as part of efforts to boost the UAE's wider energy security ambitions.

The move by Enersol to acquire an additional 42.2 per cent stake, along with its existing 25 per cent, will make the Abu Dhabi company the majority shareholder in Gordon Technologies, a bourse statement on Tuesday said.

About 80 per cent of the payment for the additional stake will be made at the time of closing the deal, while the remaining 20 per cent will be paid over the next two years, subject to certain performance conditions.

The closing of the deal will depend on regulatory approvals and closing adjustments, Adnoc Drilling and Alpha Dhabi Holding said in the statement.

The agreement follows Alpha Dhabi’s transfer of its 25 per cent stake in Gordon to Enersol in January this year.

It marked the first investment by Alpha Dhabi in the JV, which aims to invest up to $1.5 billion to acquire technology-enabled companies in the oilfield services sector.

Gordon has completed setting up its operations in Abu Dhabi and intends to begin field operations in the Mena region by the second quarter of 2024.

The company specialises in measurement while drilling (MWD) technology, which helps oil and gas companies collect important data from near the drill bit during drilling operations and sends this data to the surface in real-time, without stopping the drilling process.

“Gordon is debt-free, and its acquisition is economically accretive to Enersol from a profitability, valuation multiple, cash flow generation and dividend potential standpoint, along with a FY2023 free cash flow yield of more than 10 per cent,” the companies said.

Enersol is currently working on plans to acquire and invest in multiple businesses, subject to regulatory approvals.

“A major driver of investment decisions will be the ability of those investments to support the UAE’s wider energy security ambitions, net zero agenda and ongoing economic diversification efforts,” it said.

Last month, Adnoc Drilling was awarded a $1.7 billion contract by parent company Adnoc to provide drilling services for the recovery of unconventional oil and gas resources.

Adnoc Drilling has also set up a company called Turnwell Industries, which will fulfil the contract and explore potential future opportunities in unconventional resources.

Adnoc, responsible for most of the UAE's crude production, is focusing on developing its unconventional reserves to reach an output capacity of five million barrels per day by 2027.