Arabian Drilling, a leading national onshore and offshore drilling contractor in Saudi Arabia, has posted an all-time high record revenue of SR987 million and SR3.48 billion ($930 million), for the Q4 2023 and full-year 2023 respectively.

 

The company consolidated revenue for 2023 represented a 29% increase YoY, driven by higher rig activity, with a +11% YoY increase and higher day rates specifically in the Offshore Segment.

For Q4’23 the consolidated quarterly revenue represented a 7% sequential increase mainly due to the full contribution of the three new jackups that started in Q3’23 (AD130/140/150), lower Non-Productive Time (‘NPT’) as well as higher rig move revenue recognised in December 2023.

 

FY’23 Net Income of SR605 million was 25% higher than the Adjusted Net Income of SR484 million in FY’22, which was adjusted to account for a one-time tax effect of change in effective shareholding of SR73.8 million. Q4’23 net income was SR183 million, representing a sequential increase of 31%, driven by strong EBITDA.

 

Key wins

Ghassan Mirdad, Chief Executive Officer of Arabian Drilling, commented: “We delivered significant wins in 2023 including the completion of the offshore fleet expansion and the strategic positioning in Unconventional Gas, with 13 unconventional rig contracts awarded to Arabian Drilling to date. We look forward to playing our part in growing this exciting and sustainable sector for the kingdom. As we start taking delivery of the rigs, our focus is on the safe commissioning, deployment and start-up of the 10 rigs by Q3’24. 

 

“Our strong footprint in the onshore segment, with the addition of the 13 rigs in the Unconventional gives us a good balanced and resilient business model across offshore and land segments. To date, there has been no changes in our offshore fleet activity in light of the recent updates in the Saudi market.  

 

“We are proud to announce that Arabian Drilling was selected to drill in the emerging geothermal sector. This, together with our presence in unconventional gas will continue to entrench Arabian Drilling as an important contributor to the development of sustainable energy sources for Saudi Arabia.

 

“In line with our stated GCC ambitions, we have also completed the pre-qualification process in Kuwait which opens the door to participate in tenders with high spec land rigs.

 

“As we move into 2024, we will continue to maintain high standards in our HSE integrity and Operations service delivery to retain our position as the drilling contractor of choice.”

 

Top of guidance range

Hubert Lafeuille, Chief Financial Officer of Arabian Drilling, commented: “We delivered a strong financial performance with revenue at the top of our guidance range. The deployment of our three jackups in the summer of 2023, combined with an improved service delivery performance in Q4’23, has accelerated our ability to generate profit and cash. We also delivered for our shareholders with SR450 million returned through dividends for FY’23.

 

“Arabian Drilling is in a high intensity capex cycle to deliver on the 13 new rigs dedicated to unconventional gas with up to SR1.7 billion of additional investment deployed to complete this program in 2024. We have the required funding already secured at competitive rates to achieve this and will continue to naturally hedge the cost of our debt by investing our excess cash in short-term deposits. Overall, we are focused on financial discipline and will maintain a cautious approach to capital management.”

 

Financial highlights

Q4’23 EBITDA was SR435 million, with a margin of 44.1%, representing a +150 bps increase Quarter on Quarter (“QoQ”). The strong Q4 performance was due to higher revenues, as mentioned above, and was partially offset by start-up cost for the 10 new unconventional rigs. 

 

FY’23 EBITDA of SR1,485 million was 30% higher YoY, with a margin of 43% compared to 42% in the prior year (“FY’22”). The increased EBITDA margin is due to the accretive impact of the 5 additional jackups (AD110/120/130/140/150), partially offset by additional compensation costs and start-up cost for the 10 new rigs.

 

Q4’23 Capex spending of SR535 million was down 6% sequentially QoQ, with approximately half of the Q4’23 spending relating to the 10 new Unconventional Rigs. The Capex programme associated with the 10 new Unconventional Rigs is estimated to be between SR1.7 to SR1.8 billion, of which approximately one third was spent as of December 31, 2023 and the remainder set to be spent in H1’24. 

 

FY’23 Capex was SR1.8 billion (including SR37 million of capitalised interest), up 8% YoY. FY’23 Capex of SR1.9 billion is split between Growth Capex related to fleet expansion (3 Jackups and 10 land rigs) of approx. SR1.2 billion, Sustaining Capex for steady-state rigs of approx. SR400 million, and Capex related to Facilities, Spare Equipment and OFSAT of approx. SR300 million.    

 

Cash flow and working capital

Net Cash Flow from operating activities of SR441 million in Q4’23 was 4.5x higher QoQ, mainly due to an improvement in the Working Capital position, partially offset by mobilisation revenues collected in Q3’23.

 

Net Working Capital improved slightly from 21% to 18% of the last twelve-months [LTM] trailing Revenue in Q3’23 and Q4’23, respectively.

 

Net debt and cash position

The company’s cash and cash equivalents position as of December 31, 2023 was SR1.44 billion, of which SR969 million was invested in various short-term deposits with maximum 3-month maturity. During Q4’23, the company drew another SR500 million bank facility to complete the ongoing Capex growth plan.

 

Therefore, the company’s debt principal as of December 31, 2023 is SR3 billion, comprising SR2 billion Sukuk plus two different bank loans of SR500 million each. Repayment for one of the two loans started in Q1’24 while the one recently drawn has a one-year grace period.

 

Net debt position as of December 31, 2023 was SR1.75 billion representing an 26% sequential increase over Q3’23, as a result of the new bank loan. Accordingly, the Leverage Ratio (Net Debt/ LTM-EBITDA) also increased as expected from 1.0x in Q3’23 to 1.2x in Q4’23.

 

Rig activity & utilisation rate

At the end of 2023, Arabian Drilling reported the same level of rig activity with 47 active rigs. However, the total available fleet has now reduced from 50 to 49 rigs, after retiring one of the three unutilised land rigs from the fleet (AD28). Therefore, the utilisation rate has increased from 94% to 96% on the basis of a lower total available fleet.

 

The Offshore Segment utilisation rate was 100%, with all twelve rigs fully operational. The Land Segment utilisation was 95% with 35 operating rigs out of 37 available rigs, including the retirement of the land rig mentioned above. One of the 2 land rigs that was idle as of December 31, 2023 (AD29) has started a new contract in Q1’24 with one of its customers (Al Khafji Joint Operations).   

 

Operational performance

Aramco’s Rig Efficiency Index (REI) based on a 36-month rolling average was 93.5%, with 81% of the rigs assigned to Aramco scoring in the High & Superior performance categories. Overall, the REI for FY’23 remained very strong at an average of 94.1%.

 

During Q4’23, the company completed 47 land rig moves, with an average net saving of 1.6 days per rig move, compared to an average net saving of 0.7 day per rig move in the previous Quarter. For FY’23, the company completed a total of 175 rig moves and saved 182 days compared to Aramco’s target. This averages 1 day saved per rig move is equivalent to 6-months of additional day rate revenue.  

 

Q4’23 Non-Productive Time (NPT) improved QoQ from 1.74% to 0.97%. Overall, the 12-month rolling NPT as of 31 December 2023 settled at 1.28%, confirming the improved trend observed since Q1’23.

 

Backlog & dayrates

As of December 31, 2023, the company’s backlog stood at SR11.9 billion with an average remaining contract tenure of 2.6 years per rig for the active rigs. Q4’23 Backlog was approx. SR800 million lower than Q3’23, corresponding to approx. SR900 million of day rate revenue recognised during the quarter, less approx. SR100 million of additional firm contract backlog was signed in the quarter. During Q4’23, the company signed a one-year extension till November 2024 for the AD20 multi-purpose vessel (MPVS) as well as a one-year new contract for land rig (AD29) which was idle in 2023 and started in Q1’24.

 

The ratio of the current backlog to the LTM revenue (Book-to-Bill ratio) was 3.4x at the end of the year. The average day rate reached mid to high $30Ks for the Land Segment and around $100Ks for the Offshore Segment.

 

Guidance

FY’24 revenue is expected to be in the range of SR3.6 billion to SR3.9 billion, showing continuous growth.

 

FY’24 CAPEX is expected to be in the range of SR2.1 billion to SR2.4 billion, depending on the progress of the Unconventional Rigs Capex programme.

 

The company’s Board approved a dividend of SR2.53 per share for H2’23 to be paid in April 2024 and bringing the total dividends for FY’23 to SR450 million. Future dividends will be reviewed based on the company’s ongoing capex programme and cash management requirements to support investments for sustainable long-term growth.--TradeArabia News Service