ADNOC Drilling, Alpha Dhabi announce new JV in energy technology sector

ADNOC Drilling Company PJSC and Alpha Dhabi Holding PJSC have officially announced the formation of their strategic joint venture (JV) at the Abu Dhabi Global Market. This energy technology JV marks a significant step in the pursuit of global investments in energy technology and tech-enabled energy services.

At the forefront of this joint venture is the inaugural investment by Alpha Dhabi, which entails a 25% equity stake in Gordon Technologies. Gordon, a prominent provider of measurement while drilling (MWD) technology in the US oil and gas sector, has had its stake valued at approximately $180 million. This investment underlines the JV’s commitment to revolutionizing the energy technology landscape.

The establishment of this JV, particularly with the integration of Gordon Technologies’ 25% share capital, is poised to generate value-enhancing returns for both ADNOC Drilling and Alpha Dhabi’s shareholders. It is anticipated to synergize with ADNOC Drilling’s existing operations and bolster the company’s long-term dividend growth profile.

Gordon Technologies, established in 2014, has emerged as a leading MWD technology provider in the United States. With its strong positions in key operating basins and a projected revenue exceeding $230 million in FY2023, Gordon is instrumental in enabling efficient drilling operations. The company’s unique position in high-temperature applications and its reliability measures, which significantly surpass industry averages, further cement its status in the sector.

Notably, Gordon Technologies operates without leverage, making its acquisition particularly advantageous for the JV’s shareholders. The acquisition promises profitability, favorable valuation multiples, substantial cash flow generation, and impressive dividend potential, with an expected free cash flow yield of over 10% in FY2023.

Abdulrahman Abdullah Al Seiari, Chief Executive Officer of ADNOC Drilling, expressed his enthusiasm about the JV: “Through the incorporation of our Joint Venture, we are set to accelerate investment in tech-enabled energy solutions. Access to these technologies will support us in our operations and to accelerate well delivery optimization in the development of unconventional resources as we strive to enable gas self-sufficiency for the nation.”

Hamad Al Ameri, Managing Director and Group CEO of Alpha Dhabi, also highlighted the strategic significance of the JV: “Since Alpha Dhabi’s minority stake acquisition of Gordon Technologies in 2022, we have supported its growth strategy in the US market and laid the groundwork for expansion to the Middle East region. Through this joint venture, leveraging both Alpha Dhabi and ADNOC Drilling’s complementary capabilities, we look forward to driving further value creation for our mutual stakeholders.”

The JV, in which ADNOC Drilling holds a majority 51% stake and Alpha Dhabi the remaining 49%, aims to acquire and invest in companies offering tech-enabled oilfield services solutions. The financial results of this JV will be accounted for by ADNOC Drilling through the equity method starting from the 1Q 2024 financial results.

Overall, the joint venture is expected to be a major driver of investment decisions, supporting the UAE’s energy transition goals, net zero agenda, and ongoing economic diversification efforts.