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 presence in key GCC markets.

• The partnership with SLB leverages established contracts and customer relationships with national oil companies, providing a de-risked entry and platform for value-accretive growth.

• Move supports disciplined, value-driven expansion and enhances ADNOC Drilling's position in drilling and integrated services.

• Diversifies ADNOC Drilling's portfolio and cements its status as a fast-growing energy services company in the region.

Financial terms and conditions

• The 70% equity stake is valued at up to $112 million, including a $21 million earnout linked to business performance.

• The deal is funded through existing debt capacity, with an agreed mechanism to acquire the remaining 30% stake over time.

• Valuation is less than 4x 2025 EV/EBITDA, with immediate earnings accretion, premium returns, and an expected free cash flow yield above 10%.

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

• The platform is expected to generate over $120 million in FY 2025 revenue, with an EBITDA margin above 38% and net income margin projected at 20%.

Synergies and expected cost savings

• Rigs are compatible with domestic operations, allowing operational flexibility and risk mitigation.

• Integration of drilling and oilfield services, including advanced technologies and AI-driven efficiencies, 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.