Alpha Dhabi transfers stake in US company to Adnoc Drilling JV

The stake in Gordon Technologies has been valued at about $180 million

Adnoc Drilling, the largest national drilling company in the Middle East by rig fleet size, holds a majority 51 per cent stake in the JV with Alpha Dhabi. Photo: Adnoc

Alpha Dhabi Holding, a unit of Abu Dhabi's International Holding Company, has transferred its 25 per cent stake in US-based oil engineering company Gordon Technologies to a joint venture with Adnoc Drilling.

This marks the first strategic investment by Alpha Dhabi in the JV, which aims to invest up to $1.5 billion to acquire technology-enabled companies in the oilfield services sector.

Alpha Dhabi’s stake in Gordon Technologies has been valued at about $180 million, the companies said on Tuesday.

The formation of the JV in November along with the investment in Gordon Technologies is expected to bring “value accretive” returns to both shareholders, while supporting Adnoc Drilling’s long-term dividend growth profile.

“Through the incorporation of our joint venture we are set to accelerate investment in tech-enabled energy solutions,” said Abdulrahman Al Seiari, chief executive of Adnoc Drilling.

“Access to these technologies will … accelerate well delivery optimisation in the development of unconventional resources as we strive to enable gas self-sufficiency for the nation.”

Founded in 2014, Gordon provides measurement-while-drilling (MWD) systems to US oil and gas companies. MWD tools are used in the measurement of physical properties while drilling, such as pressure, temperature and borehole trajectory.

The company, which expects to report a revenue of $230 million for 2023, has no debt, and its acquisition is accretive to Alpha Dhabi and Adnoc Drilling from a “profitability, valuation multiple, cash flow generation and dividend potential standpoint”, the companies said.

Adnoc Drilling, the largest national drilling company in the Middle East by rig fleet size, holds a majority 51 per cent stake in the JV with Alpha Dhabi holding the remaining stake.

The Adnoc subsidiary will begin incorporating the financial results of the JV using the equity method, starting from the company’s first-quarter financial report.

Advancements in oil and gas technology, particularly in shale exploration, have taken the US to the top global oil producer spot.

The introduction of directional drilling and fracking led to America becoming a net petroleum exporter in 2020 for the first time since at least 1949.

The global oilfield services market is expected to reach $153.49 billion by 2029, from an estimated market size of $119.85 billion for this year, according to Mordor Intelligence.

North America is expected to be the largest market during the forecast period, owing to high drilling and production activity in shale fields, the research firm said.

In the UAE, Adnoc Drilling has been increasingly focusing on the country’s unconventional oil and gas resources as Adnoc pushes to increase its production capacity to five million barrels per day by 2027.

Abu Dhabi’s unconventional recoverable oil resources are estimated at 22 billion barrels of very light and sweet crude.

Light crude types are typically more valuable, easier to refine, and contain greater quantities of hydrocarbons than heavier variants.

“We have been doing unconventional for the last five years but not to the depth which will potentially [be seen] in the coming months and the years to come,” Mr Al Seiari told The National in May.

“It's an area that is [a] big focus for today … because [it] is going to be one of the main additional sources for oil and gas [in the future].”

Alpha Dhabi acquired the stake in Gordon for $164 million in 2022 as part of its global expansion strategy.

Since the acquisition, “we have supported its growth strategy in the US market and put the foundations in place for expansion to the Middle East region”, Hamad Al Ameri, managing director and group chief executive of Alpha Dhabi, said.

“Through this joint venture … we look forward to driving further value creation for the benefit of our mutual stakeholders,” Mr Al Ameri added.