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Invest in Arabian Drilling

Integral Role in KSA’s Hydrocarbon Production
Arabian Drilling is poised to benefit from its strong presence in the Kingdom and from the positive tailwinds in the onshore and offshore drilling market
  • Primarily operates in the Kingdom which is a leading oil-producing country characterised by the lowest production costs in the world.
  • The Kingdom is critical in addressing the robust hydrocarbon demand in the MENA region and globally, with the Kingdom expected to be the key contributor towards the incremental volume additions in the MENA region with 30% of the total MENA additions until 2030G.
    • The Kingdom is expected to increase its hydrocarbon production in onshore and offshore by 2025G at a CAGR of 3% between 2021G and 2025G reaching 13 mmboe/d in 2027G.
  • Arabian Drilling has played – and continues to play – a significant and integral role in the growing, resilient and changing hydrocarbon production market in the Kingdom with E&P drilling expenditure in the Kingdom expected to increase by 13% per annum from 2021G to 2025G to support increased production.
  • Furthermore, the Kingdom is expected to significantly increase natural gas production to cater to the growing gas demand in the Kingdom, with the highest demand growth of more than 5% CAGR between 2021G and 2030G compared to a 1.5% increase globally.
  • The cost competitiveness of liquids supply in the Kingdom and the Middle East as a whole is expected to result in activity concentration in the region as we move towards 2030G.
  • All of these factors are expected to drive onshore, and offshore rig demand and Arabian Drilling is well positioned to capitalize on the strong market tailwinds.

Unique Sector and Market Knowledge
The Kingdom’s national drilling champion through its specialization in onshore and offshore drilling, best-in-class asset base and unique sector and market knowledge
  • With a fleet size of 45 onshore and offshore rigs, Arabian Drilling has grown to become the number one player in the Kingdom with a market share of 17% in terms of total number of rigs, as of 31 December 2021G, with 275 annual average wells drilled over the last three years:
    • Arabian Drilling owns the 2nd largest onshore fleet in the Kingdom with an estimated market share of 19% as of 31 December 2021G. The Company’s onshore fleet ranges from medium to ultra-heavy rigs with more than 55% of the rigs less than 10 years old and around 75% with a horsepower of 2,000+, enabling the Company to handle complicated horizontal drilling operations.
    • Arabian Drilling owns the 3rd largest offshore fleet in the Kingdom with an estimated market share of 12% as of 31 December 2021G. The Company’s offshore fleet comprises of 6 jack-up rigs and 1 multi-purpose service vessel (MPSV) used for well intervention and testing services.
  • Through its comprehensive offering, business model, long-standing client relationships and understanding of market dynamics across both onshore and offshore drilling, Arabian Drilling is well placed to solidify its market leading position.
  • Additive to its core business is OFSAT Arabia LLC – a fully owned subsidiary acquired in 2017G – that specializes in the complex activity of coordinating and moving land drilling rigs. The integration has resulted in a reduction of 30% in lost time during the rig moving process since then. In 2021G, OFSAT Arabia LLC averaged 15 rig moves each month and generated SAR 174 million in revenues and SAR 23 million in net profit.
  • With cohesive and integrated support from OFSAT Arabia LLC, Arabian Drilling offers seamless services to its customers, encompassing rig moves, rig operations and drilling, in addition to providing comprehensive support services.
  • Operator in a market characterised by significant barriers to entry with some of the highest standards and stringent requirements in order to become a qualified driller and supplier to Saudi Aramco. The Company has extensive know-how on the various legal requirements and permissions required for operating in the region and is able to adapt to changes and developments in regulations to meet customer demands.
  • The Company benefits from a localised and highly skilled workforce with around 72% Saudization (at the Group level, including the Company and OFSAT Arabia LLC) and has made significant investments to train its growing local workforce. As a result, it was able to maintain resilient operations, supported by its local employee base, despite the logistics disruption impact caused by the COVID-19 pandemic.

Track Record of Operational Excellence
Track record of operational excellence in performance, quality and safety
  • Track record of operational excellence, maximizing value for its customers as evidenced through its industry-high utilization rates, robust score on Rig Efficiency Index (REI), non-productive time performance and excellent safety standards when benchmarked against international standards.
  • Arabian Drilling scores highly on the REI, a key barometer for operational performance and part of a contractor’s eligibility to participate in Saudi Aramco tenders, and, historically, it has maintained a consistently high REI score above 90% (36-month average of 92%) which has supported longer term contract extensions and renewals with Saudi Aramco, generally at premium day rate compared to the Company’s competitors.
  • Superior operational performance and REI score has resulted in the Company having a strong contract backlog of SAR 8.2 billion as of 31 July 2022G, which represents a 3.8x multiple on 2021G revenue, including SAR 5.5 billion directly from Saudi Aramco.
  • Arabian Drilling exhibited one of the lowest non-productive times in the drilling industry with 0.74% NPT in 2021G (lowest NPT achieved in the last seven years), with zero business interruption, delivering real tangible value to its customers.
  • Arabian Drilling is committed to achieving operational excellence in performance, quality and safety, through ensuring strong operational excellence foundations, training and leveraging technology to drive operational efficiencies and improvements, resulting in:
    • Best performing player in the Kingdom with outstanding performance across all relevant industry KPIs:
    • As of 30 June 2022G, the Company had a utilization rate of 91% which indicates that out of the 45 rigs, 41 rigs were contracted and operational.
    • Industry high safety record with an all-time low total recordable incident frequency rate (TRIF) and lost time incident frequency rate (LTIF) of 0.22 and 0.14 respectively as of 31 December 2021G; well below both the Company’s targets and industry averages.
    • As of 30 June 2022G, 27 rigs scored superior performance with >95% REI and 10 rigs were recognized as high performers with 85-95% REI.

Robust Financial & Operational Performance
Robust financial profile with a strong track record of resilient profitability margins and a solid balance sheet
  • Consistently delivered robust financial performance backed by a strong balance sheet with conservative leverage levels and a disciplined approach to cost management.
  • Arabian Drilling has a superior financial profile with resilient profitability through various economic cycles, achieving a 41% EBITDA margin in 2021G (and an average of more than 40% over the last three years) despite the ongoing effects of the pandemic and oil price shocks in 2020G. EBITDA margin has been consistently higher compared to global drilling peers through the cycle and has been maintained at these levels for the past three years.
  • Business model based on a lean cost structure characterised by a highly skilled work force, with an in-house maintenance and technical team. Through the implementation of various cost reduction initiatives, Arabian Drilling has managed to make significant cost savings totalling over SAR 180 million across both 2020G and 2021G.
  • In 2021G, the Company recorded total revenue of SAR 2.2 billion ($586 million) – the onshore segment recorded revenue of SAR 1.6 billion ($439 million), representing 75% of the total revenues, and the offshore segment recorded SAR 553 million ($147 million) representing 25% of the total revenues:
    • Strong increase in day rates, improved utilization rates, and new contract awards are expected to boost revenues in the short to medium term.
    • Utilization rates are expected to reach 100% by 2023G, up from 91% as of 30 June 2022G.
  • Despite some pandemic-related impacts, the Company has reacted swiftly with a strong growth in operations resulting in a significant and almost four-fold increase in the Company’s contract backlog (up from SAR 2.4 billion as of 31 December 2021G to SAR 8.2 billion as of 31 July 2022G), adding further visibility to its revenue going forward.
  • Continued strong cash generation, disciplined cost management and capex spend have resulted in the Company reducing its net debt, resulting in a healthy leverage level (1.1x as of December 2021G and 0.7x as of 30 June 2022G) which is well below its peers.

Clear Roadmap to Growth
Disciplined growth strategy to build scale, deliver performance and generate attractive shareholder returns, underpinned by several strategic and growth levers
  • Clearly defined growth strategy anchored upon three core pillars with the objectives of growing its fleet, footprint, and revenue base in order to maximize shareholder return:
    • Aims to solidify its position as the Kingdom’s national champion by expanding its fleet and also tapping into the expected growth in the KSA market, including the significant increase in the offshore drilling rigs and the surge in unconventional drilling that is expected to occur in the coming years (i.e., Jafurah unconventional gas field).
    • The Company has a track record of expanding its fleet having successfully increased its rig fleet by 40% over the past five years, from 32 in 2016G to 45 in 2021G.
    • Expand its regional footprint into other adjacent geographies through both organic and inorganic growth opportunities leveraging its infrastructure and operational expertise.
    • The Company recently submitted tender proposals in Bahrain and Kuwait. These opportunistic markets provide additional growth avenues to increase free cash flows and returns to shareholders.
    • Leverage its expertise, workforce and technology to explore new revenue streams based on ancillary services; these include training services, complex and specialized engineering services and carbon capture and storage.

Highly experienced management team
Highly experienced management team backed by its shareholders that bring a wealth of international and industry expertise
  • Senior executive management team is highly experienced, has in-depth industry knowledge and a deep understanding of both regional and international market dynamics, with over 75 years expertise in the oil and gas sector across the three members of the C-suite and including experience with top tier and high calibre oil services companies such as Schlumberger, Subsea 7 and Transocean.
  • A strong and strategic shareholder base, with TAQA (which is backed by PIF) and Schlumberger:
    • TAQA is a leading company in providing products and services to the energy industry in the Kingdom. TAQA’s strategic and largest shareholder is PIF, which in turn has identified several strategic and priority sectors – such as automotive and transport and logistics – which will directly and indirectly drive demand for oil and gas in the Kingdom.
    • Schlumberger is a globally diversified equipment and services company that provides leading edge digital solutions and innovative technologies to enable performance and sustainability for the global energy industry.
    • As a joint venture between TAQA and Schlumberger, the Company benefits from TAQA’s network, capabilities, and market depth in the upstream industry and from Schlumberger's operational know-how, innovation and cutting-edge technological solutions in the oilfield services industry.

Commitment to embedding sustainability and ESG
Strong commitment to embedding sustainability and ESG as part of the operating model
  • Clear commitment on ESG – aligned with the UN Sustainable Development Goals (“SDGs”) – with it being:
    • Embedded in the Company’s purpose of creating lasting value and welfare for stakeholders whilst keeping employees safe and minimizing adverse impacts.
    • Central to its mission of creating a culture of sustainability to deliver excellence.
    • Prominent in its vision as a leading drilling services provider in the region and delivering a key part of the Kingdom’s vision and the wider efforts of global society in dealing with the common challenges of climate change.
  • Conducted a materiality assessment measuring its emission base line and has prioritized areas of focus to where it can have the greatest impact in line with its contribution to SDGs and in line with its emission reduction roadmap. Core to the business model are efforts in:
    • Utilizing technology to reduce its emissions:
    • In 2021G, the Company’s fleet has driven over 11 million km with a 29% in reduction of fuel consumption.
    • Longer term initiatives include the installation of automated power management systems, electronic emissions monitoring systems, solar power generation at fixed locations, switching to hybrid vehicles and using gas combustion engines.
    • Deploying processes, tools and equipment to manage water and reduce waste:
    • Launched a ‘Waste Recycling Program’ for all waste generated at its rigs in 2022G (e.g., plastic and aluminium waste at all rigs sites will be recycled).
    • Initiated a ‘Water Conservation Program’, incorporated regular water testing, conducted a pilot study and assessed water conservation potential to ensure effective water management.
    • Significant water efficiencies and water savings in 2021G as well as liquid hazardous waste generation decreased by 33% in 2021G with respect to 2019G, despite a significant surge in operational activities.
    • Enhancing its social impact through numerous initiatives:
    • The Company benefits from compliance with In-Kingdom Total Value Add (IKTVA) Program and has won an IKTVA Excellence Award for five consecutive years.
    • The Company achieved 62% for IKTVA in 2020G compared to a target of 55% and expects to achieve a score of around 70% for 2021G (in line with its target).
  • Aims to incorporate ESG further into its governance structure by enhancing the roles of its existing committees for ESG oversight and including ESG metrics within business performance assessment.
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