ADNOC Drilling secures $412m contract to develop Upper Zakum oilfield

ADNOC Offshore, the offshore business of the Abu Dhabi National Oil Company (ADNOC), has awarded a five-year $412m oilfield development contract to boost crude oil production capabilities at the Upper Zakum oil field.

The Upper Zakum field, the largest producing field in ADNOC’s portfolio, is the second-largest offshore oilfield and fourth-largest oilfield in the world. The application of ADNOC Drilling’s integrated drilling services (IDS) will commence in the second quarter of the year.

The service is expected to add to the efficiency of oil production at the project, deliver significant cost savings and contribute to ADNOC’s plans to increase its production capacity as global energy demand continues to increase.

The contract will enable the efficient delivery of completion services at Upper Zakum field and adds 20 per cent to annual revenue compared with 2022, ADNOC Drilling said in a bourse filing.

The company said it is committed to expanding its comprehensive suite of services in the oilfield services (OFS) division to enable the efficient and competitive delivery of start-to-finish drilling and well completion. Last year, the drilling firm had 40 operational IDS rigs, with OFS revenue reaching $405m, a 23 per cent increase from the previous year.

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Since January 2022, ADNOC Drilling has secured contracts for oilfield services worth $5.1bn, including IDS. The contracts that the company secured last year include a $1.3bn award for the Ghasha megaproject, $1.6bn for integrated drilling fluid services and a $777m award for wireline and perforation services.

ADNOC Drilling’s exponential growth

Meanwhile, ADNOC Drilling reported a fleet utilisation rate of 96 per cent for the year ending December 31, 2022, delivering exceptional revenue efficiency while cash from operations rose by 29 per cent year-on-year to $1.52bn supporting a free cash flow of $588m.

The company accelerated its rig acquisition programme and added 16 new drilling units in 2022, cementing its position as one of the world’s largest drilling and well-completion fleets consisting of 115 rigs.

The Abu Dhabi-based firm presented strong guidance for 2023, with revenue projected at between $3bn and $3.2bn, representing year-on-year growth of up to 20 per cent. It is expecting a record net profit in 2023 of $850m to $1bn in the same period.

ADNOC Drilling projected that the OFS segment will generate between $500 and $550m in revenue in 2023. In March, the company said it will acquire ten new-build hybrid power land drilling rigs for $252m to increase its onshore capacity and meet ADNOC Group’s accelerated production capacity target.

The drilling firm said its full-year net profit surged by 33 per cent to $802m in 2022 driven by new rigs entering the operational fleet and robust growth in its onshore and oilfield services businesses.

Read: Abu Dhabi’s ADNOC Drilling approves $341m dividend

ADNOC Drilling’s revenues jumped 18 per cent to $2.67bn million, led by its onshore and oilfield services segments as the company accelerates UAE’s production capacity target of five million barrels per day (bpd) by 2027. Its earnings before interests, taxes, depreciation and amortisation (EBITDA) reached $1.2bn in 2022, with a margin of over 46 per cent, bolstering progress on the delivery of further cost efficiencies.

The company also signed a deal to acquire two additional premium offshore jack-up drilling units at a combined cost of $200m in December 2022. It has grown its offshore jack-up rig fleet to 32 since early 2021, with further significant expansion expected in 2023 and beyond.