ADNOC Drilling Company (ADNOCDRILL) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of a 70% stake in SLB's land rig business in Oman and Kuwait marks ADNOC Drilling's first regional expansion, aligning with its strategy to diversify and strengthen its regional presence through a de-risked partnership with SLB.

• Entry into Oman and Kuwait provides access to robust drilling markets, leveraging established relationships with national oil companies and SLB's operational expertise.

• The move diversifies ADNOC Drilling's portfolio, cements its status as a fast-growing energy services company, and supports disciplined, value-driven expansion.

• Partnership with SLB offers credibility, leverages strong customer relationships, and provides a platform for value-accretive growth.

• Enhances ADNOC Drilling's position in drilling and integrated services, enabling replication of competitive advantages seen in the UAE.

Financial terms and conditions

• ADNOC Drilling acquires a 70% stake in SLB's land rig business in Oman and Kuwait for up to $112 million, including a $21 million earnout linked to business performance.

• Transaction is funded through existing debt capacity, optimizing the balance sheet, with a mechanism to acquire the remaining 30% stake over time.

• Valuation is under 4x 2025 EV/EBITDA, with immediate earnings accretion, a net income margin of about 20%, and an expected free cash flow yield above 10%.

• Contracts backlog is approximately $0.4 billion, with most contracts running until 2028.

• Transaction is expected to be earnings, cashflow, and returns accretive from day one.

Synergies and expected cost savings

• Rigs are compatible with domestic operations, enabling operational efficiencies, risk mitigation, and deployment of advanced technologies and AI-driven efficiencies.

• Integration of drilling and oilfield services, including Enersol, is expected to replicate competitive advantages and optimize performance.

• Expected to be earnings accretive upon closing, delivering strong IRR and premium returns compared to domestic drilling.

• Opportunity to reduce environmental impact for customers in the region.