Home ADNOC and Baker Hughes partner to improve drilling efficiencies

ADNOC and Baker Hughes partner to improve drilling efficiencies

8 October 2018 to 07: 30
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ADNOC Baker Hughes Drilling

Abu Dhabi National Oil Company (ADNOC) and Baker Hughes, a GE company, have signed a strategic partnership agreement, which will enable and support the growth and development of ADNOC Drilling, a subsidiary of ADNOC, into a fully integrated drilling provider and construction of wells.

BHGE said on Monday that, as part of the deal, BHGE will acquire a five percent stake in ADNOC Drilling. The transaction values ​​ADNOC Drilling at approximately $11 billion. BHGE will be the sole supplier of certain proprietary, cutting-edge equipment and technologies related to the integrated drilling offering, supporting the growth of ADNOC Drilling.

“Together, ADNOC and BHGE will deliver more competitive completion times, greater drilling efficiencies and better economics, as well as capitalize on new business opportunities as ADNOC Drilling grows with its new expanded offering,” said BHGE.

The partnership represents the first time that ADNOC has brought in an international strategic partner to acquire a direct equity stake in one of its existing services companies. ADNOC Drilling is the largest drilling company in the Middle East and the sole supplier of drilling rigs and associated services to ADNOC Group companies.

BHGE has been operating in the country for over 40 years. Continued access to and support of BHGE's technology and equipment portfolio will help accelerate ADNOC Drilling's continued growth and development of a broader product offering, including drilling and well completion services. This partnership structure aligns with both ADNOC and BHGE's interests in increasing productivity and efficiency, increasing returns.

BHGE will join the board of ADNOC Drilling

The partnership is expected to generate predictable long-term revenue streams and market growth for both companies through an attractive and mutually beneficial business structure, pre-defined work plans and future dividends. ADNOC Drilling and BHGE will establish an advisory board with representation from both companies to oversee implementation and ongoing operations, and BHGE will join ADNOC Drilling's Board of Directors.

The partnership will allow ADNOC to capture more value from every barrel of oil it produces as it plans to increase its conventional drilling activity by 40% by 2025 and substantially increase the number of its unconventional wells, in line with its smart growth strategy for 2030. ADNOC Drilling will continue to be the sole equipment supplier to the ADNOC Group companies and will capitalize on ADNOC's growing upstream activity by deploying its new integrated offering to capture up to 30% of the drilling and completions market over the next three years, demonstrating the increased drilling efficiency and improved levels of customer service.

The two partners will be able to leverage the capacity of ADNOC Drilling's existing rig fleet with limited capital outlay. The partnership will gain significant new business opportunities, including the potential to offer integrated drilling services across UAE borders.

The Doctor. Sultan Ahmed Al Jaber, UAE Minister of State and CEO of ADNOC Group, said: “We selected BHGE after a rigorous and competitive process as a partner with whom we have a long-standing working relationship and who share the vision and values long-term policy of ADNOC. This exclusive partnership with BHGE comes at an important time in Abu Dhabi's drilling needs, as ADNOC develops its conventional and unconventional hydrocarbon resources and at the same time sees future potential for further regional growth. This will ensure that we are able to better serve our initial growth while capturing and retaining greater value.

“The partnership forms an important building block of ADNOC's 2030 smart growth strategy, as we continue to drive operational efficiency and performance, and get even more value out of every barrel we produce. The combined capabilities and experience of this partnership will create greater drilling efficiencies and faster well completion times, generate attractive returns and enable the transfer of know-how and access to technology. Importantly, it will also drive job creation and economic growth, as well as maintain a healthy level of competition in the UAE's dynamic oilfield services market. ”

Another step in the transformation of ADNOC

This partnership is another step in ADNOC's group-wide transformation, which is supported by a new and expanded approach to strategic partnerships and co-investments, as well as more proactive management of ADNOC's business portfolio and capital allocation. .

BHGE President and CEO Lorenzo Simonelli said: “This partnership brings together BHGE and ADNOC, supported by a close and long working relationship. We are delighted to have a minority stake in ADNOC Drilling to jointly develop and further enhance the company's technical capabilities, market access and value. Uniquely, it allows us to generate predictable revenue streams and long-term growth for both companies and allows us to invest in a stable, reliable and secure market environment. Backed by BHGE's leading portfolio of technology and services, ADNOC Drilling will enable ADNOC to unlock significant value from its untapped resources, while building local capabilities and accelerating overall market growth. ”

He added: "The transaction significantly enhances our activity in the region and demonstrates our unique ability to create value for our customers and shareholders through innovative commercial arrangements, partnerships and cutting-edge technology solutions."

The UAE is located in one of the largest hydrocarbon super basins in the world, with significant potential to exploit its undeveloped reservoirs and further develop its existing resources. The realization of this potential, along with the continued growth and development of ADNOC Drilling, will provide more opportunities for local third-party service providers to compete and support ADNOC's expanding integrated drilling and ancillary services requirements.

BHGE currently employs over 1.000 people across the UAE and supports customers with products and services that span the entire oil and gas value chain.

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