Abu Dhabi National Oil Company (Adnoc) is seeking to boost its oil and gas production. According to people familiar with the matter, the logistics subsidiary of the UAE oil and gas giant Adnoc is in talks to acquire a large stake in HEA Energy. The deal could value the Middle Eastern offshore energy services firm at up to $3 billion. If completed, the transaction would strengthen the UAE's position in the offshore oil and gas services sector, just months after the country exited the Organization of the Petroleum Exporting Countries (OPEC).
Deal details
The parties in the negotiations are Adnoc Logistics & Services (Adnoc L&S), which plans to acquire a large minority stake in HEA or take a controlling stake, according to the people familiar with the matter. The talks have made some progress, but there remains a possibility that they could fall apart and no final deal could be reached. The state-backed energy logistics company is flush with cash. Shipping through the Persian Gulf has been disrupted by the Iran conflict, raising the cost of exporting regional oil, and tanker charter rates have risen sharply this year, boosting the company's performance. Adnoc L&S posted a record quarterly profit of $917 million in the second quarter, a sharp year-on-year increase.
Industry background
Earlier this year, the UAE exited OPEC, the oil cartel that regulates prices, after which Adnoc went all out to increase oil and gas output. Leaving OPEC gives the state oil company greater investment freedom to expand capacity and further establish its position as an energy power. In August this year, Adnoc's natural gas business segment announced it would invest more than $8 billion in business expansion. Adnoc L&S provides supporting services for offshore drilling projects, operates more than 100 vessels, and transports crude oil, liquefied natural gas and refined products globally. HEA is an unlisted company, and if Adnoc L&S acquires a stake in it, it would enhance the UAE's influence in the offshore oil and gas services industry and help Adnoc L&S expand its business footprint to regions such as the North Sea and the United States. HEA was founded in 2022 and is headquartered in Abu Dhabi. The company operates a network of jack-up barges, floating platforms that can support offshore wind farms and maintenance work on oil and gas facilities; it also provides accommodation vessels for oil and gas workers and battery-powered subsea work vessels. According to information disclosed on the company's website, HEA's operating profit in the first half of this year was $65.2 million, up 128% year on year; revenue doubled to about $100 million. Despite the threat of Iranian drone and missile attacks, the UAE remains committed to exporting oil from the Persian Gulf. Adnoc operates a shuttle shipping business: tankers load crude oil inside the Persian Gulf, transport it to the outside of the Strait of Hormuz, and then deliver it to downstream customers. In August this year, Adnoc L&S spent about $1.3 billion to buy 11 vessels (5 gas carriers and 6 crude oil tankers) to expand its energy shipping capacity. Adnoc L&S is listed on the Abu Dhabi exchange with a market value of more than $15 billion; its parent company, the state oil group Adnoc, holds about an 80% stake.