Ades announces major rig expansion plan
The Egyptian firm, while benefiting from the country's own upstream boom, is moving into new markets
In its H1 results announcement, Egypt-based oil and gas service company Advanced Energy Systems (Ades) has highlighted plans for a major expansion in the number of rigs it will be able to offer to upstream operators. The company's business model is to buy up and refurbish legacy rigs before leasing them at a low cost to oil and gas operators.
Mohamed Farouk, Ades' chief executive, in a statement accompanying the half-year results, said that in June the company finalised the acquisition of three ultra-shallow offshore jack-up rigs from subsidiaries of Nabor. The rigs are at present contracted to Saudi Aramco.
Then in July, Farouk added: "we significantly expanded our onshore capabilities by signing a definitive agreement with Weatherford for the acquisition of 31 onshore rigs". He described "this landmark transaction" as "a turning point in Ades' growth story that springboards us from a leading oil and gas services provider to a top-tier regional player."
Ades has been well placed to cash in on the surge of interest in Egypt's upstream. This increased still further in the wake of Eni's discovery of the mega-giant offshore Zohr gasfield. Farouk in May told Petroleum Economist that around half of Ades' business was in Egypt, with the aim of reducing this to 25% by the end of 2019. The company has its eye on new exploration activity that Aramco is planning in the Red Sea. And it has formed a joint venture with Vantage Drilling to explore for natural gas in Egypt's deep-water offshore.
Ades aims to occupy what Farouk called the "middle ground" of the rig-supply business: "In Egypt, we have a good understanding of the market and a good reputation. Now we're getting a good regional footprint."
The acquisition of the 31 onshore rigs will help the company achieve its aspiration to be a regional player. Before the latest deals, seven Ades offshore rigs were operating in Egypt and six in Saudi Arabia, with just three onshore rigs in Algeria. Of the 31 onshore facilities now being secured from Weatherford, 12 are in Kuwait and two in southern Iraq.
In light of the ongoing fleet expansion, the results statement continued, Ades has earmarked from existing liquidity capital expenditure of $84m over the next two years, which includes $40m on the refurbishment and modernisation of the 31 rigs from Weatherford.