Arabian Drilling Company (2381) Q2 2024 earnings summary

Executive summary

• Achieved strong operational execution and financial growth in H1 2024, with revenue reaching SAR 1.91 billion, despite offshore rig suspensions impacting utilization rates and segment mix.

• Fleet expanded from 49 to 53 rigs with the deployment of four new unconventional rigs; five of ten unconventional rigs started drilling contracts, with the remainder expected online by year-end, ahead of schedule.

• Safety milestones reached, with seven rigs accumulating 63 years without lost time injury; launched three CO2 reduction projects and published a 2023 Sustainability Report.

• Maintained resilient financial position and focus on mitigating rig suspensions, expanding unconventional operations, and prudent capital management.

• Recorded an impairment loss of SAR 105 million in Q2 2024 due to the suspension and non-renewal of three offshore rig contracts with Saudi Aramco.

Financial highlights

• H1 2024 revenue grew 21% year-over-year to SAR 1.91 billion; Q2 2024 revenue was SAR 939 million, down 3% sequentially due to offshore suspensions.

• H1 2024 EBITDA was SAR 791 million (+20% YoY); Q2 2024 EBITDA at SAR 386 million (41% margin, -5% QoQ).

• Adjusted net income for H1 2024 was SAR 271 million (-4% YoY); Q2 adjusted net income SAR 125 million (-14% QoQ), impacted by higher depreciation and lower financial income.

• Net profit for H1 2024 was SAR 166.4 million, down from SAR 281.8 million year-over-year, with a SAR 105 million impairment loss in Q2.

• Record high CapEx in Q2 at over SAR 600 million, mainly for unconventional rig expansion; H1 CapEx totaled SAR 919 million.

• Free cash flow negative at -SAR 299 million in Q2, reflecting ongoing investment cycle.

Outlook and guidance

• 2024 revenue guidance reiterated at SAR 3.6–3.9 billion, reflecting 4–12% year-on-year growth, with offshore suspensions factored in.

• CapEx guidance maintained at SAR 2.1–2.4 billion for 2024, focused on unconventional rig program; capex expected to peak in coming quarters.

• Margins expected to contract from low-to-mid 40s to low 40s by year-end, with unconventional rigs offsetting offshore impact.

• Full deployment of 13 unconventional rigs by year-end anticipated to drive sustainable growth.

• Management is monitoring the impact of rig suspensions and will reassess capex and asset utilization in the next reporting period.