Arabian Drilling, Saudi Arabia’s drilling major, posted an impressive 36% year-on-year increase in net income to SAR282 million ($75.16 million) in the first half (H1) of 2023.
The company closed Q2’23 with a consolidated quarterly revenue of SAR791 million, in line with Q1’23 on a similar rig activity level. For H1’23, the company achieved a consolidated revenue of SAR1,570 million, 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 SAR335 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 SAR658 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% to SAR140 million, mainly due to higher depreciation cost and finance charges. Operating cash flow of SAR348 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 SAR150 million represented approximately 5% of the last 12-month trailing revenue, due to the favourable variance in trade and other payables.
Capex spending accelerated during Q2’23 to SAR517 million (including SAR20 million for the portion of the interest capitalised) as the shipyard activities for AD130, AD140 and AD150 were completed. H1’23 capex of SAR782 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 SAR1.8 billion and included SAR900 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 SAR879 million as of June 30 2023 increased by 23% compared to Q1’23. Accordingly, the leverage ratio (Net-Debt/Last 12 Month EBITDA) also slightly increased from 0.6 to 0.7 in Q2’23 mainly due to a change in cash position.
At the end of 30 June 2023, Arabian Drilling reported a fleet utilization 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 of 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 utilization rate was 100%, with all the nine rigs fully operational. The remaining three jackups (AD130, AD140 and AD150) were mobilized to Saudi Arabia in June 2023 and started their five-year contract in July 2023.
As of June 30 2023, the company’s backlog was SAR7.6 billion with an average remaining contract tenure of 2.1 years per rig. In Q2’23, c. SAR150 million was added to the backlog, mainly coming from contract extensions and awards with SLB and Baker Hughes related to four Land Rigs. The ratio of the current Backlog to the LTM Revenue (Book-to-Bill ratio) was 2.5x.
As announced, post June 30, 2023 the company’s backlog increased substantially following Aramco’s new contracts award worth an estimated SAR3 billion for 10 new-build land rigs for Unconventional Gas fields.
GUIDANCE
Full Year 2023 revenue guidance remains unchanged and is expected to be in the range of SAR3.3 billion to SAR3.5 billion, the company said. 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 SAR2.2 billion to SAR 2.4 billion. Accordingly, the company anticipates the Leverage Ratio to increase in line with the deployment of existing cash to support capex growth.
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.” - TradeArabia News Service
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