Adnoc Drilling approves new dividend policy with 10% annual growth

The company may approve additional dividends on top of the progressive dividend policy

In May, Adnoc raised $935 million by selling 880 million additional shares in Adnoc Drilling to institutional investors. Photo: Adnoc

Adnoc Drilling, the largest national drilling company in the Middle East by rig fleet size, has approved a new dividend policy with an annual growth of at least 10 per cent over the next five years.

Under the new policy, no less than $4.8 billion will be distributed to shareholders between 2024 and 2028, the company said on Tuesday, adding that it may approve additional dividends on top of the progressive dividend policy after considering growth opportunities that boost free cash flow.

Shareholders can expect two dividend payments each fiscal year: The final dividend from the previous year in the first half, and the interim dividend for the current year in the second half.

“The approval of this enhanced dividend policy reflects Adnoc Drilling's commitment to delivering increasing value to shareholders, enabled by an accelerated and multi-faceted growth strategy,” said Abdulmunim Al Kindy, Adnoc upstream executive director and vice chairman of Adnoc Drilling.

The announcement comes a month after parent company Adnoc raised $935 million by selling 880 million additional shares in Adnoc Drilling to institutional investors. The sale represented 5.5 per cent of the total issued share capital.

“Adnoc’s recent placement of an additional 5.5 per cent of Adnoc Drilling’s share capital means there is now a greater number of shareholders to benefit from these enhanced returns,” Mr Al Kindy said.

The offering increased Adnoc Drilling’s free float to 16.5 per cent, with Adnoc retaining a majority stake in the company.

A higher free float is expected to help Adnoc Drilling to be included in the Morgan Stanley Capital International Emerging Market Index.

The MSCI Emerging Markets Index is a broad index that includes a large number of stocks from 24 emerging market countries, covering about 85 per cent of the total market capitalisation of these countries.

Last month, Adnoc Drilling was awarded a $1.7 billion contract by Adnoc to provide drilling services for the recovery of unconventional oil and gas resources.

Adnoc Drilling also set up a company called Turnwell Industries, which will fulfil the contract and explore potential future opportunities in unconventional resources.

In January, Adnoc Drilling and Alpha Dhabi Holding, a unit of Abu Dhabi's International Holding Company, set up a joint venture that aims to invest up to $1.5 billion to acquire technology-enabled companies in the oilfield services and energy sectors.

Adnoc Drilling owns 51 per cent of the venture with Alpha Dhabi holding the remaining stake.

Adnoc, responsible for most of the UAE's crude production, is working to develop its unconventional reserves as it looks to reach an output capacity of five million barrels per day by 2027. It can already produce up to 4.85 million bpd.

Abu Dhabi’s unconventional recoverable oil resources are estimated at 22 billion barrels of very light and sweet crude, comparable with Adnoc’s flagship lower-carbon Murban grade.

Adnoc Drilling reported a 26 per cent increase in first-quarter profit as its offshore jack-up and oilfield services businesses continued to strengthen.

Net profit for the three months ending in March rose to $275 million, up from $219 million in the same period a year earlier, while revenue surged 24 per cent annually to $886 million.