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Saudi drilling company eyes fast growth in oil, gas production

Highlights

Arabian Drilling has 17% market share of Saudi rigs

Saudi Aramco is its main customer

Capacity to reach 12.3 mil b/d by 2025: Aramco CEO

Saudi Arabia's Arabian Drilling Co. is looking for growth in the kingdom's crude oil and natural gas production as the country will be "critical" to meet demand for hydrocarbons that it sees from the Middle East and globally, according to a Sept. 18 statement about plans to sell shares.

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Saudi Arabia is expected to account for 30% of total Middle East and North Africa hydrocarbon additions until 2030, the company said in the statement on the local stock exchange.

Upstream growth plans in the Middle East are accelerating amid higher oil prices this year, which have prompted calls from buyers for more supply. Dated Brent has jumped 22.9% in the past year to $91.02/b as of Sept. 16, according to assessments by Platts, part of S&P Global Commodity Insights.

Arabian Drilling has a total fleet of 45 rigs, with a 17% market share in the kingdom, with an average of 275 wells drilled over the last three years. Arabian Drilling was looking for an IPO in May 2021 and had planned to issue shares by the end of 2021, according to S&P Global research.

"The strong market outlook has positively impacted the kingdom's onshore and offshore drilling activity, with the kingdom's rig count expected to grow significantly to meet the increasing production demand," Arabian Drilling said. The kingdom's annual contracted onshore rig count is expected to grow at a 14% compound annual growth rate from 2021 to 2025, while offshore activity grows at a 12% pace, it said.

Saudi Arabia's Saudi Aramco plans to raise its sustainable production capacity to 12.3 million b/d by 2025 as the world's largest oil-exporting company accelerates plans to bring additional output to market to meet the needs of global consumers, its chief executive told reporters during an earnings call Aug. 14. The country is also expected to increase natural gas production to cater to the growing gas demand in the country, Arabian Drilling said in the statement.

Arabian Drilling operates in Saudi Arabia along with the Saudi/Kuwait-shared Neutral Zone, with long-standing contracts with Aramco, Al-Khafji Joint Operations, Schlumberger Middle East S.A and Dowell Schlumberger Saudi Arabia Ltd. (both part of Schlumberger) and Baker Hughes Saudi Arabia, according to the statement. The selling shareholders in the IPO are Schlumberger and TAQA of Riyadh, it said.

Arabian Drilling said E&P drilling expenditure in the kingdom is expected to increase by 13% a year from 2021 to 2025 to support increased production, underpinned by its main customer, Aramco.

Current capacity

Saudi Arabia said its current production capacity is around 12 million b/d but S&P Global's Platts Analytics estimates it closer to 11.5 million b/d. The kingdom, alongside fellow OPEC producer UAE, holds virtually all of the world's remaining spare capacity.

The kingdom plans to bring on additional capacity in increments, with its Dammam field set to provide a further 75,000 b/d by 2024, and the offshore Marjan and Berri fields expected to add 300,000 b/d and 250,000 b/d, respectively, by 2025. The expansion of the Zuluf field is projected to add another 600,000 b/d by 2026, with the Safaniyah development also set to add 700,000 b/d by late 2027.

Arabian Drilling will invest proceeds from its IPO in expanding its current fleet capacity, chief executive Ghassan Mirdad said in a statement.

"We have a clear roadmap of how we are going to build scale and we plan to invest some of the proceeds into growing our fleet and footprint," he said.

"We have four offshore rigs on order, two of which are recently acquired, and two of which are leased, and we plan further rig acquisitions as we leverage our expertise and workforce to ensure we meet our client obligations," he added. Arabian Drilling said the final price of the offer shares will be based on the end of a book-building period starting on Sept. 28 until Oct. 5.