Baker Hughes agreed to acquire a 5% stake in the United Arab Emirates' state-owned Abu Dhabi National Oil Co.'s drilling and well construction subsidiary ADNOC Drilling for $550 million, in a deal that would help expand and develop the largest drilling company in the Middle East.
The deal consideration values ADNOC Drilling at about $11 billion, according to an Oct. 8 news release. Under the partnership, Baker Hughes would be the exclusive provider of proprietary drilling equipment to ADNOC Drilling, in a deal that is expected to improve drilling efficiencies, well completion and well economics, the companies said.
Baker Hughes and ADNOC Drilling would draw up a commercial structure, pre-defined work plans and future dividends as part of the partnership. Beginning 2023, Abu Dhabi National Oil would also receive deferred consideration that would depend on the progress and development of its new conventional and unconventional development program.
Baker Hughes would also have a representative in ADNOC Drilling's board. Both companies would establish an advisory board in charge of implementation and operations.
The deal is anticipated to help Abu Dhabi National Oil achieve its goal to grow conventional drilling activity 40% by 2025, increase its unconventional wells and potentially expand its regional drilling services. The partnership may also open up opportunities for ADNOC Drilling to offer its drilling services outside of the United Arab Emirates.
"In a unique way, it allows us to drive predictable revenue streams and long-term growth for both companies and lets us invest in a stable, reliable and secure market environment," Baker Hughes Chairman and CEO Lorenzo Simonelli said.
The deal is scheduled to close in the fourth quarter. Moelis & Co. is acting as Abu Dhabi National Oil's financial adviser, and Citi is acting as adviser to Baker Hughes.
Abu Dhabi National Oil produces about 3 million barrels of oil and 10.5 Bcf/d of raw gas. ADNOC Drilling provides drilling rigs and associated services exclusively to Abu Dhabi National Oil. Baker Hughes is a global provider of integrated oilfield products and services operating in 120 countries.