Investment Rating - The report assigns an "Outperform" rating to ADNOC Drilling, indicating an expected relative performance exceeding the benchmark index by over 10% in the next 12-18 months [1]. Core Insights - ADNOC Drilling is positioned as the exclusive drilling service provider for the Abu Dhabi National Oil Company (ADNOC) and aims to support ADNOC's strategic goal of achieving a production capacity of 5 million barrels per day by 2027 [2][3]. - The company has a strong focus on sustainable operations and energy optimization, deploying hybrid land drilling rigs equipped with battery storage systems to enhance efficiency and reduce fuel consumption [2]. - ADNOC Drilling's unique business model allows it to maintain industry-leading profit margins, with an EBITDA margin of approximately 50%, significantly higher than the industry average of around 18% [3]. - The company has set a target for a compound annual growth rate of at least 10% in dividends from FY2024 to FY2028, with an expected dividend of at least $867 million for FY2025 [3]. - ADNOC Drilling is expanding its operations beyond the UAE, having secured pre-qualification in Kuwait and Oman, and is already operational in Jordan [2][4]. Summary by Sections Company Overview - ADNOC Drilling is headquartered in Abu Dhabi and is the sole drilling service provider for ADNOC, with ADNOC holding 78.5% of its shares [2]. - The company is committed to supporting ADNOC's production and gas processing goals, aiming for self-sufficiency in natural gas by 2030 [2]. Financial Performance - ADNOC Drilling's drilling rigs are under long-term contracts with ADNOC, ensuring minimum return guarantees, with offshore rigs expected to yield an internal rate of return of 11%-13% and onshore rigs 10%-12% [3]. - The company anticipates a dividend increase of at least 10% year-on-year, with a current dividend yield of approximately 5% [3]. Project Developments - The company has successfully deployed eight drilling rigs for unconventional projects, with plans for further expansion depending on demand [4]. - The second phase of the unconventional project is expected to reach a final investment decision by the end of FY2025 or early FY2026, potentially involving up to 20 additional rigs [4]. Market Position - ADNOC Drilling collaborates with Chinese oil service companies, viewing them as partners rather than competitors, which enhances its operational capabilities in the region [6]. - The company plans to increase its fleet from 142 rigs at the end of FY2024 to over 151 rigs by FY2028, supporting its growth strategy [6].