Arabian Drilling announces impressive FY’22 results confirming robust performance and growing rig activity

Arabian Drilling’s posted FY’22 Revenue of SAR 2.7 billion, reflecting a year-on-year (“YoY”) increase of 23%, in line with the expectations. Revenue growth was driven by the combined effects of a higher rig utilization rate and an increase in day rates due to strong demand, particularly in the offshore segment.

FY’22 Earnings before Interest, Tax, Depreciation and Amortization (“EBITDA”) was SAR 1.1 billion, with a margin of 42%, also in line with expectations. Net Profit of SAR 558 million was 104% higher, including a one-off exceptional tax credit of SAR 73.8 million and resulting in an EPS of SAR 6.85. Excluding the exceptional tax credit, adjusted EPS was SAR 5.94, representing a YoY increase of 74%.

Strong FY’22 Operating Cash Flows of SAR 1.2 billion were 84% higher whilst Capital Expenditure rose materially by 606% with a total spending of SAR 1.7 billion. The surge in Capital Expenditure reflects the addition of 3 newly acquired jackups as well as upgrades and modification shipyard costs for another 2 leased jackups. All 5 jackups are secured with multiyear Saudi Aramco contracts with the 2 leased jackups having commenced their 3-year firm contracts in 4Q’22.

The current total fleet is 50 rigs, comprising of an available fleet of 47 units (38 land rigs and 9 offshore rigs), plus the 3 newly acquired jackups currently being upgraded to Saudi Aramco’s specifications.

The Company’s robust financial position is evidenced by its strong Balance Sheet and ample cash reserves. The extraordinarily strong cash position achieved in FY’22 was driven by the proceeds generated from the Initial Public Offering (“IPO”) of SAR 872 million (net of transaction costs) and Sukuk issue of SAR 2 billion, which provides a strong foundation for future growth and expansion.

Key Financial Metrics

1. FY’22 EPS is calculated on a weighted average basis of 81,430,137 shares (FY’21: 80,000,000 shares)
2. Excluding extraordinary tax credit of SAR 74m for FY’22 (SAR 3.2m for Q4’22) related to a one-off deferred tax adjustment
3. Active rigs include rigs operating and generating revenue. At YE’22, the total available fleet size was 47 rigs

Revenue Breakdown

OPERATIONAL HIGHLIGHTS

Arabian Drilling reported a high fleet utilization rate of 94% (44 active rigs out of a total available fleet of 47 units), following the reactivation of certain land rigs during FY’22 and delivered an exceptional operational efficiency with an average Year-to-Date Rig Efficiency Index across the fleet of 93%. Overall, Non-Productive Time was at 1.51%. In 2022, the Company completed 178 land rig moves, with an average saving of 1.71 days per rig move compared with Saudi Aramco’s target.

At YE’22, the Company’s Backlog was SAR 8.9 billion with an average remaining contract tenure of 2.3 year per rig, following new contracts awards and renewals of existing contracts for 32 rigs during the year. The average day rate achieved in FY’22 for Land rigs was in the mid USD 30Ks while average day rate for the Offshore rigs was in the high USD 90Ks, excluding the Multi-Purpose Service Vessel and the 3 recently acquired jackups that are due to commence operations during 2023.

Although the Total Recordable Incident Frequency (‘TRIF’) of 0.33 for FY22 remained lower than the target, regrettably one work-related fatality was recorded in May 2022. In a phase of rapid expansion, Arabian Drilling remains totally focused on strengthening the prevention of injuries across all work locations with an emphasis on on-site management visibility, coaching roving task force and STOP Work authority.

GUIDANCE

Arabian Drilling expects total FY’23 revenue to be between SAR 3.3 billion and SAR 3.5 billion.

Capital Expenditure is forecasted to be in a range of SAR 1.2 billion to 1.4 billion, reflecting the ongoing shipyard preparation for the 3 newly acquired jackups as well as discretionary refurbishment and upgrade projects for certain land rigs and facilities.

The Company plans to maintain a healthy leverage with a Net-Debt to EBITDA ratio below 1.0x. Arabian Drilling also plans to distribute its first semi-annual cash dividend in 4Q’23 with a targeted pay-out ratio of 80%, based on half-yearly results ending on June 30, 2023.

It is important to note that the above guidance does not include the impact of any potential regional expansion plans and any current or upcoming tenders, including Jafurah Unconventional Gas field development.

COMMENTS

Ghassan Mirdad, Chief Executive Officer of Arabian Drilling, commented:

“2022 was truly remarkable for Arabian Drilling and I am proud of the multiple achievements and milestones achieved by our team. The Company underwent a massive transformation journey which included a Company rebranding, the issue of a SAR 2 billion Sukuk, the expansion of our fleet to service a record high backlog and new clients as well as the successful IPO on the Saudi Exchange with overwhelming support from the Market.   

We are excited about the Company’s growth trajectory and expect another strong financial performance in FY’23 reflecting the dynamism of the Market that is driving both higher rig utilization and increased day rates. In particular, the offshore business is expected to continue ramping up as we deploy our 3 newly acquired jackups on 5-year contracts with Saudi Aramco whilst onshore rig demand will enter its next growth phase supported by the development of the Jafurah unconventional gas field. 

Of course, celebrating the Company’s success is meaningless without our ability to ensure the safety of our colleagues as an absolute priority, especially during the high growth phase that we are experiencing. To this end, we take complete responsibility for achieving the highest Health, Safety and Environment standards across our operations everywhere and every time.“

Hubert Lafeuille, Chief Financial Officer of Arabian Drilling, commented:

“We delivered an impressive operational and financial performance in line with the guidance provided to the Market. In addition, we were particularly pleased to have our Sukuk issuance and IPO recognized as best-in-class capital markets transactions, with the ‘Best IPO Award’ received from the Saudi Exchange (Tadawul).

Looking ahead, we remain focused on optimizing our capital structure by maintaining a healthy Balance Sheet with a low gearing level. This will give us an ample headroom to finance further organic or in-organic growth while returning sustainable dividends to our shareholders.”