The Investment Case of ADNOC Drilling

[Music] amazing thank you so much for being here and for taking the the time so I have been asked not to start until the video is on the screen so I'll wait wait wait take instructions very carefully and wait wait for wait for that so thank you all so much for for being here we're here to talk about adnoc drilling what we believe is a completely unique Equity story and investment proposition not only in the Middle East but on a global on a global basis right on one hand we have what we believe is the most downside protected investment proposition anyone can come in this is basically 15year take or pay contract as the exclusive driller in Abu Dhabi who's doing all the drilling for adnoc with basically guaranteed irrs during this this period and full cost reimbursements during this period and guaranteed dividend policy that will see us distribute more than5 billion minimum dividends over the next 5 years more than 20% of our current market cap on the other hand as a strong of a growth story as any story you will see we've been growing more than 30% year on year on average for the last three years we'll continue to grow by around 18% in the medium uh term and beyond that as well we're owned 78 a half% by adnoc the national Energy company of the UE giving us an extremely strong backing and the remaining 21 a half% is owned between the Abu Dhabi exchange and our Cornerstone investors we're part of all the global major indices msci foty the vast majority of our free flow actually sits outside the UE all the big Global long only investors emerging market energy investors are all in the in the stock this has been reflected in the performance of the stock where we're up 0% in the last 12 months as one of the absolute if not the best performing stock in the uee and and and the region and it continues to be massive upside from here so also the most covered stock in the uee we have 16 analysts covering the stock including 14 buy recommendations the most buy recommended stock across the entirety of the Middle East with price targets reaching as high as 8.2 dams for the stock up from the current 5.6 level so we believe substantial further upside and reating opportunities in the stock if we dive into our growth our growth is coming from all across so on one hand domestically we benefit from being the exclusive driller for adnoc so any Barrel that adnoc gets out of the ground oil gas onshore offshore conventional unconventional comes out by ADN Drilling and hence all the ADN growth plans that you hear of right whether it's going to 5 million bar per day by 2027 whether it's the gas the unconven itional gas the LG the sour gas whatever you can of you hear is being extracted by ADN Drilling and that's growth for us and that's why just domestically we're growing 18% uh year on year effectively we're taking this position as the national champion of the uee and also taking it outside the outside the UE right so today almost 10% of our operations are now global in just under a year of our Global expansion and this a function of setting up a specialist technology enabled Global oil field services platform and soul where we basically now have 140 patents for companies operating in 35 countries serving more than 70 Upstream oil and gas uh clients and all of this while being part of the adnoc 2045 net zero one of the fastest Net Zero road maps uh globally and cutting our emissions by 25% by 2013 if you look at where adnoc is going right and this is really a reflection of just one part of where we're going plus our regional growth ADN is growing across the board right oil is going to 5 million barrels per day gas more LG capacity more industrial domestic capacity more residential domestic uh capacity International Ambitions for example we're now live in Jordan because adnoc is live there and we're live with them so wherever they go we benefit plus our own independed growth uh so we basically sit at this kind of intersection right where basically we benefit from that growth but then we don't have any of the oil price exposure right so effectively take all the positive things about energy about the infrastructure growth the number of balance per day but then take out all the more challenging things around oil price volatility and that effectively becomes ADN drilling because the way we get paid we get paid on irr so as long as capacity is happening activity is happening doesn't matter where the oil price is we continue to get paid we continue to grow and that's why we've grown through covid we've grown through the 2015 16 downturn and whatever fluctuation oil price so basically anyone who wants to play energy but not play the oil price ad no dilling is the way to do that in terms of dividend policy we have the most kind of progressive and dividend policy H basically pretty much out there right so we have a 5-year dividend policy a guaranteed dividend approved by the board approved by the general assembly it's not linked to Performance it's not linked to financials it's not linked to a payout ratio it's not linked to anything it's $788 million dividend this year growing by at least 10% as an absolute hard floor for at least the next five years this is pretty much money in the bank and this is just a floor right so the dividends can actually grow faster and potentially much faster than that today this dividend that we're paying the Imp side of it is only 60% of net income and only 50% of pregrowth capex free cash flow so substantial more cash available and when you combine this with the fact that with only one time net debt to we have massive balance sheet flexibility plus effectively free cash for flexibility to take both growth and dividends to the next level free float today we one of the most actively traded stocks on the Abu Dhabi Exchange were regularly a top five liquidity stock day in day out trading $20 million plus every day this is partially thanks to two placements that we've done this year one by adok for a 5 and a half% stake one by hmp for 1% stake this took our uh total free flow to 16 and a half% got us to be part of msci got us to have a higher weight in in fotsy got us to have all the big Global Investors uh in the in the in the stock and today effectively just what we're hearing is just people can't still get enough of the stock right and effectively this is starting this positive momentum where basically every time we had a placement the share price within days and weeks was trading substantially higher than where the placement was done h on on the decarbonization sustainability side effectively all our latest 19 rigs all come in as hybrid rigs that work not only with Pary diesel generators but also with batteries and great connections all our labor camps our recr camps are over time effectively being transformed to also have solar panels and grid connections and hence basically we're firmly on our road for the Net Zero if you look at our financials since we've listed in 2021 we've pretty much doubled the size of the company H even if you look at our net income base even more than double going from $600 million net income to $1.3 billion net income in just three years right and this is was predominantly just domestic growth and predominantly was oil growth as adnoc went from 4 million to get to close to it 5 million Target so if you take this doubling in the last three years and then add to it the international the gas the technology the m&a that gives you a picture of what our growth in the future would look like quarter on quarter we've had five straight quarters from q323 to q324 where we've beaten consensus every single quarter for the last five quarters right and that puts us on a very strong road map to continue to do so continue to beat and continue to surprise to the upside with every quarter that we publish and obviously we operate at the highest margins in the industry our Mar BDA margins go as high as 68% on our our segments and our Blended deid is 50 our Blended net income is 33% and this is basically driven by growth across all segments of our operations that are all basically carrying that and it's translating directly into kind of free cash flow to the bottom line we operate on a forward guidance as well which again we tend to constantly beat and be ahead of thank you so much for taking the time to listen again if one thing I leave you with as defensive grow story as it gets fully guaranteed on the downside unlimited upsides would love to see you all on the stock and thank you very much [Music]