A joint venture between Abu Dhabi's Adnoc Drilling and Alpha Dhabi Holding has agreed to increase its stake in U.S.-based petroleum engineering firm Gordon Technologies for $270 million as part of efforts to boost the UAE's broader energy security ambitions.
EnerSol's move to acquire an additional 42.2% stake on top of its existing 25% stake will make the Abu Dhabi company the largest shareholder in Gordon Technologies, it said in a stock exchange statement on Tuesday.
Approximately 80 percent of the additional equity payment will be made upon closing of the transaction, with the remaining 20 percent to be paid over the next two years, subject to certain performance conditions.
Completion of the transaction is subject to regulatory approvals and closing arrangements, Adnoc Drilling and Alpha Dhabi Holding said in a statement.
The agreement follows AlphaDabi's transfer of a 25% stake in Gordon to EnerSol in January this year.
This is Alpha Dhabi's first investment in the joint venture, which aims to invest up to $1.5 billion to acquire technology companies in the oilfield services sector.
Gordon has completed its operational ramp-up in Abu Dhabi and expects to commence local operations in the MENA region by Q2 2024.
The company specializes in measurement-while-drilling (MWD) technology, helping oil and gas companies collect critical data from near the drill bit during drilling operations and transmit this data in real time to the surface without stopping the drilling process.
“Gordon is debt-free and the acquisition is economically accretive to EnerSol from a profitability, valuation multiple, cash flow generation and dividend potential perspective, with a free cash flow yield in excess of 10% for fiscal 2023,” the companies said.
EnerSol is currently engaged in multiple acquisition and investment plans, subject to regulatory approval.
“A key driver of investment decisions is the ability of these investments to support the UAE's broader energy security ambitions, net-zero plans and ongoing economic diversification efforts,” it said.
Last month, Adnoc Drilling was awarded a $1.7 billion contract by parent company Adnoc to provide drilling services for the recovery of unconventional oil and gas resources.
Adnoc Drilling has also set up a company, Turnwell Industries, which will fulfil the contract and explore potential future opportunities in unconventional resources.
ADNOC, which produces most of the UAE's crude oil, is focusing on developing unconventional reserves as it aims to reach a production capacity of 5 million barrels per day by 2027.
Updated: June 11, 2024, 6:30 AM
