Adnoc Gas reports drop in first-half profit due to lower price environment

Company has access to 95% of the UAE's natural gas reserves, estimated to be the seventh largest globally

Adnoc Gas pipeline. The company supplies more than 60 per cent of the UAE's gas needs. Photo: Adnoc

Adnoc Gas expects robust long-term structured demand growth for natural gas, despite the current lower price environment dragging its first-half profit down.

The company, the integrated gas processing unit of Adnoc, reported an annual 12 per cent drop in net profit for the six months to the end of June to $2.25 billion, it said in a filing to the Abu Dhabi Securities Exchange, where its shares are traded.

First-half revenue fell to $10.62 billion from $13.28 billion a year earlier.

The company said it maintained stable margins in a lower price environment and it is on track to meet its 2023 guidance.

The January-June period earnings reflect the “resilience and robustness” of the company’s business in the lower price environment compared to the higher prices witnessed in the same period last year, said Ahmed Alebri, chief executive of Adnoc Gas.

“This performance demonstrates the strength of our business, which was also supported by selling more high-margin export liquids – a strategy that has proven effective,” he said.

Adnoc Gas said it maintained high reliability with a 98.9 per cent average across its facilities in the first half of the year, contributing to a 15 per cent quarterly increase in production volumes in the last quarter.

Competition for liquefied natural gas has increased since Russia's invasion of Ukraine last year, with Europe importing record volumes of the supercooled fuel to replace Moscow's gas supplies.

Global LNG trade hit a high of $450 billion in 2022 amid a surge in European demand, according to the International Energy Agency.

To adapt to lower liquefied petroleum gas and brent crude oil prices in the first half of the year, Adnoc Gas said it shifted towards higher-margin export liquids and focused on increased efficiency.

These measures enabled the company to maintain a flat earnings before interest, taxes, depreciation and amortisation of $1.8 billion and net income of $1 billion in the April-June period.

“We continue to witness long-term structural demand growth for natural gas as a critical fuel for the responsible global energy transition,” Mr Alebri said.

“Our recent signing of significant long-term LNG agreements and our domestic investments demonstrate that we remain ideally positioned to meet both local and international demand, while further decarbonising our operations in line with the UAE’s Net-Zero 2050 ambition.”

Net income in the second quarter of the year fell 29 per cent on an annual basis to $1 billion, while revenue dropped to $5.4 billion, from $7.1 billion in the same period last year.

Adnoc Gas maintained its dividend target of $1.62 billion in the fourth quarter of 2023 and a further $1.62 billion dividend in the second quarter of 2024.

The company expects to grow the annual target dividend amount by 5 per cent per annum on a per-share basis over the 2024-2027 period, it said.

As part of its strategic growth plans and entry into the international gas market, Adnoc Gas on Friday said it would acquire a 30 per cent equity stake in Azerbaijan's Absheron gas and condensate field in the Caspian Sea.

Under the agreement, Azerbaijan's state oil company Socar and France's TotalEnergies will each hold a 35 per cent stake in the gasfield.

The company has also signed a three-year supply agreement with TotalEnergies Gas and Power, a subsidiary of France’s TotalEnergies, for the export of LNG as demand for less polluting fuel picks up globally amid decarbonisation efforts.

Last month, Adnoc Gas announced a 14-year supply agreement valued at between $7 billion and $9 billion with Indian Oil Corporation Limited, the South Asian country’s largest refiner. The agreement will Adnoc Gas supplying up to 1.2 million metric tonnes per annum of LNG to the Indian company.

Adnoc Gas has access to 95 per cent of the UAE's natural gas reserves, estimated to be the seventh largest globally.

It also supplies more than 60 per cent of the UAE's gas needs.