Markets

Adnoc Drilling successfully floats further stake

May 23, 2024, 4:08 AM

The Adnoc Drilling head office. Adnoc will not be able to sell any more of its stake for at least six months

Adnoc Drilling lists 880m shares
Professional investors only
Q1 profit $275m

Abu Dhabi state oil company Adnoc has successfully placed a further 5.5 percent of listed subsidiary Adnoc Drilling, increasing the company’s free float to 16.5 percent.

The sale of an additional 880 million shares through a book-building process will boost trading of Adnoc Drilling’s stock on Abu Dhabi’s bourse.

Adnoc restricted the share sale to so-called professional investors, with strong demand from institutional investors in the GCC and internationally. Retail investors were not able to participate.

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At AED3.90 per share, around 70 percent above the initial public offering (IPO) price of AED2.30 per share, the offering represented a 5.6 percent discount to the company’s closing price on Wednesday.

As part of the sale, Adnoc, which will retain a majority 78.5 percent shareholding in the company, committed not to sell any more of its stake in Adnoc Drilling for at least six months.

A higher free float is also expected to provide a pathway towards inclusion in the Morgan Stanley Capital International (MSCI) Emerging Market Index, which may take place at the next quarterly review, subject to regulatory approval, according to a statement on Thursday.

Several Gulf companies have launched initial public offerings this year, extending a flotation drive among government-owned and privately controlled businesses.

This trend runs counter to more subdued activity in other regions as higher-for-longer interest rates make borrowing more expensive for would-be IPO subscribers as well as boosting returns in other asset classes such as bonds and cash deposits.

Khaled Al Zaabi, group chief financial officer, Adnoc, said the interest was “testament to Adnoc Drilling’s growth trajectory since its IPO and its exciting future growth potential”.

Adnoc Drilling made a first-quarter net profit of $275 million, up from $219 million in the prior-year period.

The company completed a $1.1 billion IPO in September 2021 that was more than 30 times oversubscribed. This sold 11 percent of Adnoc Drilling at AED2.30 per share.

The stock fell 4 percent to AED4.13 on Wednesday, trimming its gains since listing to 80 percent.

Strategic partner Baker Hughes owns 5 percent of Adnoc Drilling and US oil and gas drilling company Helmerich & Payne holds 1 percent.