Gulf IPO Rush Resumes as Adnoc Tees Up Largest Deal of 2023

(Bloomberg) -- The United Arab Emirates’ national oil company plans to raise $2 billion or more by listing its natural gas business in what could the largest initial public offering so far this year.

The deal should give Adnoc Gas a valuation of at least $50 billion, according to people familiar with the matter. That would make it one of the world’s biggest listed gas firms and roughly on a par with Eni SpA and Occidental Petroleum Corp.

Abu Dhabi National Oil Co. will offer a 4% stake in the unit, formed through a merger of liquefied natural gas and gas-processing arms. The IPO will start on Feb. 23 and the final offer price will be on March 3, with trading slated to start 10 days later.

Adnoc Gas expects to pay dividends of $3.25 billion for 2023. It made record adjusted underlying earnings of $8.7 billion in the year through October 2022. The strong performance came as global gas prices soared after Russia invaded Ukraine and Europe rushed to secure supplies from other countries.

Prices in Europe fell below €50 a megawatt-hour on Friday for the first time in almost 18 months, thanks to mild winter weather, strong inflows of LNG from the US and reduced industrial demand. But gas costs there and in Asia remain well above long-term averages.

Prior to the offering, Adnoc transferred 5% of Adnoc Gas to Abu Dhabi-based Taqa, the biggest power producer in the UAE.

The IPO is part of a drive by energy-rich Persian Gulf nations to fund the diversification of their economies and open their stock markets more to international investors. High oil and gas prices helped the region — especially the UAE and Saudi Arabia — buck a global IPO slump last year, and more listings are expected in the coming months.

Oman plans to raise as much as $244 million from the IPO of a state oil-drilling unit, Abraj Energy. The offering starts on Monday, three day before Adnoc Gas.

Adnoc Gas’s listing is running on an accelerated timeline. Adnoc only announced it at the end of November. The tight schedule led to Goldman Sachs Group Inc. and Bank of America Corp. dropping off the deal, Bloomberg News reported.

It will be the first major IPO in the Middle East this year after a blistering 2022, which saw almost $23 billion raised. First Abu Dhabi Bank PJSC and HSBC Holdings Plc are the lead banks.

Abu Dhabi’s largest IPO to date was chemicals firm Borouge’s $2 billion deal from mid-2022. The record for the UAE as a whole is Dubai Electricity & Water Authority’s $6.1 billion listing last April.

LNG Push

Adnoc Gas has a production capacity of 10 billion cubic feet a day across eight onshore and offshore sites and a pipeline network of more than 3,250 kilometers (2,020 miles).

It will be at the forefront of the UAE’s push to boost production and trading of LNG. Demand for gas — used largely as a fuel for power plants and heating — is expected to stay strong for at least the next several years. The global market is tight as Europe tries to replace flows from Russia, the source of 40% of its supplies before the Ukrainian invasion.

The UAE is among the countries Europe is looking to, and this week it delivered Germany’s first-ever cargo of LNG from the Middle East.

Adnoc is building an LNG plant at the port city of Fujairah to triple its production capacity to around 15 million tons a year. That may make it one of the world’s ten biggest exporters of the fuel.

Adnoc Gas doesn’t own the Fujairah LNG project, but expects to be given the chance to buy it from Adnoc before it starts commercial production, according to the IPO prospectus.

Adnoc Gas said it plans growth-related capital expenditure of $14 billion over the next seven years, most of which will be funded by debt.

--With assistance from , and .

(Updates with context on IPOs, gas.)

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