Arabian Drilling Company (2381) Q3 2024 earnings summary

Executive summary

• Q3 2024 marked the first full quarter impacted by offshore rig suspensions, yet EBITDA margins were maintained, demonstrating operational resilience and adaptability.

• All 10 unconventional land rigs from the first award are now deployed, with three more from the second award to be operational before year-end, accelerating revenue contribution and ahead of schedule.

• Revenue for the nine months ended 30 September 2024 was SAR 2.77 billion, up 11% year-over-year, driven by unconventional land rig deployment.

• The company faced contract suspensions and non-renewals for several rigs due to changes in Saudi Aramco's drilling requirements.

• Focus on safety, sustainability, and expanding non-core business and offshore fleet.

Financial highlights

• Q3 2024 revenue was SAR 863 million, down 8% sequentially due to offshore rig suspensions, partially offset by new unconventional land rigs.

• Q3 EBITDA was SAR 358 million (41.5% margin), down 7% quarter-on-quarter; YTD EBITDA SAR 1,150 million, up 9% year-over-year.

• Adjusted net income SAR 85 million in Q3 2024, down 32% sequentially; YTD adjusted net income SAR 356 million, down 16% year-over-year.

• CapEx for Q3 was SAR 548 million, mainly for the unconventional land rig program, resulting in negative free cash flow of SAR 70 million.

• Gross profit for the nine months was SAR 577.5 million, down from SAR 703.0 million year-over-year.

Outlook and guidance

• 2024 revenue is expected to close around SAR 3.6 billion, at the low end of prior guidance, reflecting recent business developments.

• Full-year CapEx is projected between SAR 2.1 billion and SAR 2.2 billion, also at the low end of guidance due to cost-saving initiatives.

• Full contribution from all 13 unconventional rigs is anticipated from Q1 2025, with expected quarterly revenue of SAR 200 million and EBITDA margins in the low to mid-30s%.

• Leverage ratio expected to peak above 2.0x in coming quarters before normalizing.

• Management continues to monitor the impact of rig contract suspensions and will reassess impairment at year-end.