Arabian Drilling's net income drop unrelated to revenue: CEO

Argaam

19-03-2025

Arabian Drilling Co.'s (ADC) net income decline in 2024 was not due to revenue generation challenges, but was primarily driven by costs associated with operating 13 new onshore drilling rigs for unconventional gas extraction, CEO Ghassan Mirdad told Argaam.
In addition, non-cash items, including depreciation, asset impairment, and debt servicing costs related to capital expenditures contributed to the earnings decline.
Mirdad explained that the company invested approximately SAR 1.9 billion in capital expenditures last year, with the majority allocated to developing unconventional rigs.
In Q4 2024, the company successfully deployed three conventional drilling rigs and 11 of the 13 unconventional rigs last year. The operation of these rigs generated SAR 230 million in revenue, underscoring the positive financial impact of these investments.
Mirdad noted that all 13 unconventional rigs are now fully operational and are expected to generate up to SAR 800 million in annual revenue.
By the end of 2024, ADC had 49 active rigs out of a total fleet of 59, making it the largest drilling contractor in Saudi Arabia by fleet size.
In his 2025 forecast, Mirdad confirmed that while the company does not anticipate an increase in its total rig count, it may reallocate rigs between the oil and gas sectors to enhance operational efficiency and better align with market and customer needs.
He emphasized that this strategic approach enables ADC to adapt to demand fluctuations and maintain a high level of operational flexibility.
On rig distribution, Mirdad highlighted that most of ADC's rigs are dedicated to gas extraction, reflecting the company's commitment to strengthening this sector in Saudi Arabia.
He also underscored ADC's competitive advantage, particularly in light of national initiatives aimed at increasing gas usage in power generation. Saudi Arabia is targeting a 60% share of gas in its electricity generation mix.
ADC plays a key role in the Jafurah field, the largest shale gas field outside the US, which presents a major strategic opportunity for the company.
The firm aims to extract gas with high efficiency leveraging its expertise and advanced onshore drilling technologies.
Mirdad further stated that ADC is well-equipped to address the technical and environmental challenges of shale gas drilling, reinforcing its leadership position in the energy sector.
Regarding ADC's decision to provide future outlooks on a quarterly rather than annual basis, Mirdad explained that this shift was driven by the difficulty of forecasting various factors that could impact operations — positively or negatively — amid rapidly evolving geopolitical and economic conditions.
He said providing quarterly forecasts allows for more precise market assessments and ensures a fairer evaluation of the company's performance.
For Q1 2025, ADC expects to maintain the revenue at Q4 2024 level, with the potential for a 5% increase.
In 2025, ADC's primary focus will be maximizing its fleet utilization. To support this objective, the company signed a memorandum of understanding (MoU) with Shelf Drilling Co. to expand its international offshore operations.
'We have already participated in several tenders as part of this alliance and are now awaiting the results, which are expected to be announced in nearly three months,' Mirdad stated.