Arabian Drilling, Saudi Arabia’s national Drilling Champion, announced its Q2’23 and H1’23 financial results, with an impressive 36% increase in net income to SR282 million ($75.16 million) YoY.

 

Post June 30, 2023 the company’s backlog has increased substantially following Aramco’s new contracts award worth an estimated SR3 billion for 10 new-build land rigs for Unconventional Gas fields. This places the company to deliver a robust second half this year. 

 

Already, as of June 30, 2023 the company had a healthy backlog of SR7.6 billion with an average remaining contract tenure of 2.1 years per rig. 

 

Rig activity level

Arabian Drilling closed Q2’23 with a consolidated quarterly revenue of SR791 million, in line with Q1’23 on a similar rig activity level. 

 

For H1’23, the company achieved a consolidated revenue of SR1.57 billion, representing a +25% increase over H1’22, mainly driven by increased rig activity. In particular, H1’23 includes the full revenue impact of the two Jackups (AD110 and AD120), both of which started their three-year contract in late 2022. 

 

Q2’23 EBITDA was SR335 million, with a margin of 42.4%, representing a +90 bps increase QoQ, mainly due to improved operational performance in the Land Segment. H1’23 EBITDA increased by +27% to SR658 million with a slightly higher margin of 41.9% supported by the increased contribution from the Offshore Segment.  

 

Q2’23 Net Income decreased slightly by -1%, mainly due to higher depreciation cost and finance charges.

 

Operating Cash Flow

Operating Cash Flow of SR348 million for Q2’23 was -26% lower QoQ due to the mobilisation fee for AD110 and AD120 that was collected in Q1’23, as well as Zakat and Income Tax payments pertaining to FY’22. As of 30 June 2023, Net Working Capital of SR150 million represented approximately 5% of the last 12-month trailing Revenue, due to the favorable variance in Trade and Other Payables.

 

Capex spending accelerated during Q2’23 to SR517 million (including SR20 million for the portion of the interest capitalised) as the shipyard activities for AD130, AD140 and AD150 were completed. H1’23 Capex of SR782 million was also significantly higher than H1’22 that did not include major Capex related to offshore fleet expansion.

 

The company’s cash position as of June 30, 2023 was in excess of SR1.8 billion and included SR900 million in short-term investments. The available cash will be deployed to finance the building of the new rigs awarded.

 

The net debt position of SR879 million increased by +23% compared to Q1’23. Accordingly, the Leverage Ratio (Net-Debt/Last 12 Month [“LTM”] EBITDA) also slightly increased from 0.6 to 0.7 in Q2’23 mainly due to a change in Cash position.

 

Key goal

Ghassan Mirdad, Chief Executive Officer of Arabian Drilling, commented: “We are particularly pleased to have delivered the latest jackups safely, on time and on budget. Delivering these three rigs in July was one of our key goals for this year and proof of the high quality of our team.

 

“The major win in the Unconventional Gas will be the opportunity for Arabian Drilling to establish a strong footprint in an area that we believe will drive the growth of land drilling for the foreseeable future. Finally, as we enter our next phase of growth, our safety culture is at the heart of everything we do, and we remain focused on achieving the highest Health, Safety and Environment standards across our operations.”

 

Hubert Lafeuille, Chief Financial Officer of Arabian Drilling, commented: “We have improved our margin in Q2’23 as the Land Segment regained a robust operational performance. We built up a strong balance sheet precisely to support our growth and we will now deploy our capital to finance the construction of the 10 new Land Rigs. While we might see a higher leverage ratio and higher finance cost in the short-term, we are in a strong position to continue to deliver value to our shareholders.”

 

Operational highlights

At the end of June 30, 2023, Arabian Drilling reported a fleet utilisation rate of 94% (44 active rigs out of a total available fleet of 47 units), in line with Q1’23 and with no significant changes in the rig count or status.

 

The Land Segment comprised 35 rigs operating over a total fleet size of 38 units. The three land rigs that were not contracted included two rigs requiring a significant upgrade (AD28 and AD44) plus another rig (AD29) which was assigned as a training facility, as previously announced.

 

The Offshore segment utilisation rate was 100%, with all the nine rigs fully operational. The remaining three jackups (AD130, AD140 and AD150) were mobilised to Saudi Arabia in June 2023 and started their five-year contract in July 2023.

 

Aramco’s Rig Efficiency Index

Aramco’s Rig Efficiency Index (REI) based on a 36-month rolling average remained strong with a score of 94% across the fleet and in line with Q1’23. Overall, Non-Productive Time (NPT) for Q2’23 was at 1.30%, a marginal increase compared to Q1’23. However, the 12-month rolling average NPT has slightly reduced as of June 30, 2023.

 

During Q2’23, the company completed 38 land rig moves, with an average net saving of 1.3 days per rig move, reflecting a significant QoQ improvement.

 

At the end of Q2’23, the 12-month rolling average of the Total Recordable Incident Frequency (“TRIF”) improved to 0.75 vs. 0.84 in Q1’23. Arabian Drilling continues to increase its focus on the prevention of injuries across all its work locations by strengthening the management visibility on site, training, improving risk management and implementing the “Stop Work Authority” safety policy. 

 

Arabian Drilling was also recently recognised for its commitment to attain the highest operational standards and achieved certifications including ISO 14001:2015 for environmental management system, ISO 45001:2018 for Occupational Health and ISO 9001:2015 for Safety and Quality Management.

 

Guidance

Full Year 2023 (FY’23) Revenue guidance remains unchanged and is expected to be in the range of SR3.3 billion to SR3.5 billion.

 

The updated FY23 Capex guidance, including the portion of the spend for the current year related to the building of the 10 rigs for the new Unconventional Gas contracts, is now expected to be in the range of SR2.2 to SR2.4 billion. Accordingly, the company anticipates the Leverage Ratio to increase in line with the deployment of existing cash to support Capex growth.

 

Based on the Board’s recommendation and subject to the Shareholders’ approval, the company intends to distribute a cash dividend of SR2.53 per share during the Fourth Quarter of 2023.-- TradeArabia News Service