UAE oil producer Adnoc to list drilling unit in Abu Dhabi IPO

Abu Dhabi National Oil Co. is planning to sell shares in its drilling unit in what would rank among the largest initial public offerings in the United Arab Emirates.

The company will offer at least 7.5% of Adnoc Drilling, it said on Monday. An IPO could value the business at up to $10 billion, Bloomberg reported earlier this year, citing people familiar with the matter. In 2018, when Baker Hughes bought a 5% stake in Adnoc Drilling, that deal valued it at about $11 billion, including $1 billion of debt.

Given the valuation, a sale of that size could raise about $750 million and Adnoc said it may increase the amount of stock on offer. It will be the second IPO of one of the group’s subsidiaries after the share sale in its retail fuel unit for $850.8 million in 2017.

The proposed listing comes as Abu Dhabi tries to revive IPOs on its bourse. The bourse, known as ADX, is offering sweeteners that include flexibility on the minimum stake size required for share sales and promising to reduce or forgo listing fees. 

Satellite operator Yahsat listed in July, and sovereign wealth fund Mubadala Investment Co. is poised to select underwriters for a potential offering of Emirates Global Aluminium that could value it at more than $15 billion, people with knowledge of the matter said last week. Adnoc has also started preparations for a potential IPO of its fertilizer joint venture Fertiglobe.

Asset Sales

Abu Dhabi, which holds most of the oil in the UAE, is using its energy assets to draw in global investors along with their funds and expertise as the nation puts cash into efforts to diversify the economy. While the UAE plans to keep selling oil for decades it’s trying to build out industries like technology, manufacturing and tourism to prepare for a world in which hydrocarbon demand is falling.

The UAE is the third-biggest producer in the Organization of Petroleum Exporting Countries, behind Saudi Arabia and Iraq. Adnoc is pursuing a strategy of attracting investors and raising cash from minority stakes in its businesses.

Regional energy powerhouses like the Saudis are also selling energy assets and trying to wean themselves off an overwhelming reliance on crude for government income. The kingdom recorded the world’s largest IPO when it sold shares in Saudi Aramco in 2019.

With governments and companies looking to go green and cut oil use, Saudi Arabia and the UAE see their huge reserves of low-cost crude and natural gas supporting chemicals and hydrogen production and establishing  them among the last suppliers of crude.

Adnoc Drilling IPO Offer Details:

• Offer period to start on Sept. 13 and end on Sept. 23 for retail investors
• Will represent 1.2 billion shares
• There will be three tranches
• First for individuals and others investors: offering closes on Sept. 23
• Second for qualified institutional investors: offering closes on Sept. 26
• Third for Adnoc employees and UAE national retirees: offering closes on Sept. 23
• Announcement of final offer price: Sept. 27
• Expected date of listing: Oct. 3
• First Abu Dhabi Bank, Goldman Sachs, HSBC, JPMorgan are joint global coordinators
• EFG-Hermes, Emirates NBD Capital, International Securities, Merrill Lynch International and Societe Generale are joint bookrunners