Ades, the company that specializes in providing drilling and production services to the oil and gas sector, confirmed that its contracts with Aramco, state owned petroleum and gas company, constitute 70% of its revenues.
Ades stated that there have been no changes or developments in its platform fleet activities that could negatively affect its financial performance.
Confidence in Growth
Ades remains confident in the group’s ability to grow. This confidence is based on their strong global presence and the continued high demand for offshore drilling platforms. Moreover, utilization rates have increased to record levels.
CEO’s Statement
In an interview with “Al Arabiya Business,” Ades Holding’s CEO, Dr. Mohamed Farouk Abdel Khalek, said that their primary focus is on Saudi Aramco and the Gulf region. He affirmed that there’s no impact on their operations currently. Moreover, if changes occur in the coming weeks, the company will relay information to the market.
Global Presence
Ades is present in various global locations including Indonesia, Qatar, and India. This gives the company the opportunity to utilize their assets elsewhere if needed, although it’s not the primary goal but a contingency plan.
Market Demand, Financial Performance
The strong demand in markets where Ades operates allows for high daily revenue, around $130,000, creating growth opportunities without affecting the company’s financial performance.
Contracts with Aramco
In the past two years, Ades Holding won 19 contracts from Aramco, thanks to competitive pricing. These contracts average a duration of five years. A clause in the contracts with Aramco stipulates that in case of cancellation, 50% of the five-year term is paid upfront without utilization.
Aramco’s Decisions and Impacts
Abdel Khalek anticipates that the chances of contract cancellations by Aramco are minimal. If it happens, Ades would still earn income for two and a half years without work.
Aramco’s Production Capacity Directive
Saudi Aramco recently received instructions from the Saudi Ministry of Energy to maintain its maximum sustainable production capacity at 12 million barrels per day, without increasing it to the anticipated 13 million barrels per day by 2027.
Competitive Advantage
Ades’ contracts with Aramco are very competitive compared to others. This competitiveness stems from their focus on equipment costs, financing, and other factors. Even if Aramco decides to cancel some contracts, Ades would not be affected due to its competitiveness and its majority Saudi shareholder base exceeding 75%.
Asset Reallocation and Expansion
The company can quickly reallocate some assets to other projects. They have several expansions in Southeast Asia, earning over $130,000 daily. Within 4 to 6 weeks, they can redirect these assets due to preparations and existing presence in the region, including three assets in India and one in Indonesia. Demand in Thailand and over 12 tenders currently being contested in Southeast Asia and Qatar.
Profit Margins, Market Conditions
The company doesn’t expect its profit margins in Saudi Arabia to be affected. The daily rates for contracts in Saudi Arabia were less challenging in the past, ranging from $70,000 to $100,000. Now, they exceed $130,000.
Moreover, Saudi Arabia is a high-requirement market, allowing for increased profit margins compared to other markets where costs are about 50% less.
Related Topics :
Saudi Energy Ministry Achieves Global Quality Recognition
Fitch upgrades Saudi Arabia credit rating to ‘A+’, testimony of Vision 2030 success
Saudi Arabia Considers Additional Aramco Share Offering
