Abu Dhabi’s national oil company ADNOC’s IPO strategy appears to be timely.
After the multi-billion dollar IPO of its drilling unit, ADNOC Drilling, the company now aims to repeat this success with its Fertiglobe fertilizer JV.
Fertiglobe raised $ 795 million during its initial public offering (IPO), making it the third largest offering on the Abu Dhabi Stock Exchange. This week, the company said that at the end of the book building process, the final bid price was set at 2.55 dirhams ($ 0.69), somewhere in the middle of the price range. from 2.45 to 2.65 dirhams indicated last week.
The company, which is a joint venture between Dutch chemicals producer OCI and ADNOC, has sold 1,145,582,011 ordinary shares, equivalent to 13.8% of the share capital issued by Fertiglobe. Current figures indicate that Fertiglobe’s market capitalization once listed will be around $ 5.8 billion. The market capitalization corresponds to the expectations of analysts, who previously indicated a range of between 5.4 and 6 billion dollars. The IPO is currently 22X oversubscribed on average, and 32X for the Qualified Investor tranche excluding pillar investors. The total demand would be $ 17.4 billion.
Fertiglobe’s success follows ADNOC’s drilling IPO which was also a major success. In early October, ADNOC Drilling’s IPO reportedly reached gross proceeds of over $ 1.1 billion. ADNOC indicated that the offer was 31 times oversubscribed. Total registered demand reached a level of 34 billion dollars. Due to strong demand, ADNOC had already increased the size of the offering from 1,200,000,000 ordinary shares to 1,760,000,000 ordinary shares, ie the equivalent of 11% of the issued share capital.
The successes mentioned above could lead to more active ADNOC proposals, as the Abu Dhabi-based oil and gas giant moves towards a complete restructuring of its overall portfolio. The NOC is not only benefiting from the current market sentiment, driven by increasing global demand for oil and gas, but also aims to monetize its strategic position in chemicals and fertilizers.
Fertiglobe is a perfect example. Not only is fertilizer demand expected to increase significantly globally, but fertilizer prices have increased due to production disruptions in Europe and Asia. The combination of having in your hands natural resources, necessary for production or raw material, gives ADNOC, like its compatriots Aramco, Gazprom and others, a financial advantage which is currently monetized.
In the coming weeks, other projects should be made public, such as a new investment in the Abu Dhabi giant’s LNG, but also the deployment of a large-scale renewable energy approach to support its current strategy.
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The main question then: Is ADNOC considering a full-scale IPO like its Saudi counterpart Aramco? The timing for such an IPO could be right, with oil prices trading above $ 80 a barrel. The IPO of its national oil and gas giant will not only provide additional liquidity, which can even be considered “free cash”, while pushing for more attractive integration into global financial markets.
The challenges for NOCs like ADNOC or Aramco today are not only to keep their crucial oil and gas strategy in place, but also to increase their non-oil business. The huge investments required to set up a (green) hydrogen business unit and capture a large part of the renewable energy market will not only be costly but also tricky. ESG and SDG activists will be very reluctant to support NOCs in the years to come. Although oil is king, the NOCs must ensure that they raise enough money to finance future growth. Diversification and transition don’t come cheap.
By Cyril Widdershoven for Oil chauffage
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