Abu Dhabi National Oil Company (ADNOC) announced plans to sell a 5. 5% stake in its drilling subsidiary, ADNOC Drilling, through a bookbuild offering. This move aims to enhance liquidity, generate capital, and broaden the investor base for the subsidiary.
The offering will involve around 880 million ordinary shares, representing a portion of ADNOC Drilling's total outstanding shares. The bookbuild process, a method for gathering investor interest to determine the offering price, is expected to conclude on May 23, 2024, with the final details of the sale revealed soon after.
ADNOC, the majority shareholder in ADNOC Drilling, is expected to benefit from this partial divestment by raising capital that can be used for various purposes. The company aims to heighten the attractiveness of ADNOC Drilling for investors by increasing its liquidity. A more liquid stock, with a higher volume of shares traded daily, is generally viewed as more appealing to investors.
This offering comes more than two years after ADNOC's successful initial public offering (IPO) for ADNOC Drilling. Since the IPO, ADNOC Drilling has experienced significant growth and delivered strong returns to its shareholders, including a recent upgrade to its dividend policy.
By expanding the investor base for ADNOC Drilling, ADNOC expects to achieve a number of strategic objectives. A more diverse group of shareholders can bring a wider range of perspectives and expertise to the company. An increased number of shares in circulation, known as the free float, can also improve the company's eligibility for inclusion in major stock market indexes. Inclusion in a prestigious index like the MSCI Emerging Market Index can further enhance the company's profile and attract new investors.
The decision to sell a portion of ADNOC Drilling reflects ADNOC's commitment to optimizing its portfolio of assets. This approach involves retaining a controlling ownership stake while strategically divesting minority interests to generate capital and achieve specific financial goals.
The bookbuild offering for ADNOC Drilling is expected to be met with interest from institutional investors seeking exposure to a well-established player in the oil and gas drilling sector. The success of the offering will depend on several factors, including global oil prices, investor risk appetite, and the overall performance of ADNOC Drilling in the coming months.