Abu Dhabi National Oil Company (ADNOC; www.adnoc.ae) signed two new strategic equity partnerships with Eni S.p.A. (Rome, Italy; www.eni.com) and OMV (Vienna, Austria; www.omv.com) covering both ADNOC Refining and a new trading joint venture (JV), which will be jointly established by the three partners.
In one of the largest ever refinery transactions, Eni and OMV will acquire 20% and 15% shares in ADNOC Refining respectively, with ADNOC owning the remaining 65%. The agreement values ADNOC Refining, which has a total refining capacity of 922,000 barrels per day, and which operates the fourth largest single site refinery in the world, at an enterprise value of $19.3 billion. As a further part and condition of this agreement, the partners will also establish a trading joint venture, in which Eni and OMV will own 20% and 15% of the shares respectively. Proceeds to ADNOC from the sale are estimated to be $5.8 billion, subject to completion adjustments. The transaction reflects the scale, quality and growth potential of ADNOC Refining’s assets, coupled with an advantageous location from which to supply markets in Africa, Asia and Europe.
Further value will be created from the new global trading joint venture, which, once established, will be an international exporter of ADNOC Refining’s products, with export volumes equivalent to approximately 70 per cent of throughput. Domestic supply within the UAE will continue to be managed by ADNOC.
Supported by the high cash flow generation capacity of ADNOC Refining, the three partners have committed to substantial growth plans for ADNOC Refining in the short to mid-term. The partners have also agreed to a comprehensive capital allocation framework to achieve self-funded growth, paired with an attractive dividend policy.
Claudio Descalzi, CEO of Eni, said: “These agreements consolidate our strong partnership with ADNOC. In the space of less than one year, we have been able to create a business hub with world class upstream operations and a material and efficient refinery capacity with further potential growth.”
“This transaction, which allows us to enter the United Arab Emirates’ downstream sector and represents a 35% increase in Eni’s global refining capacity, is in line with our announced strategy to make Eni’s overall portfolio more geographically diversified, more balanced along the value chain, more efficient and more resilient to cope with market volatility.”
This sentiment was echoed by Dr. Rainer Seele, Chairman of the OMV Executive Board and CEO, who said: “I am pleased to further build on our strategic partnership with ADNOC and Abu Dhabi. With the acquisition of a share in ADNOC Refining and the creation of a global trading joint venture, OMV has established a strong integrated position in Abu Dhabi along the oil value chain, spanning from upstream production to refining & trading and petrochemicals. We are confident that our extensive operational refining know-how and trading experience will contribute to sustainable value creation and profitable growth.”
Under the terms of the agreements, ADNOC, Eni and OMV’s trading joint venture will be incorporated at Abu Dhabi Global Markets. Physical and derivative trading will likely begin as early as 2020 when all necessary processes, procedures and systems are in place. Eni and OMV will provide ADNOC with know-how, operational experience and support to accelerate the development of the trading joint venture, enabling ADNOC and its partners to optimize their systems and better manage their international product flows.
Once operational, the trading joint venture will help guide ADNOC Refining’s activity and operational decision-making, ensuring ADNOC secures the best possible value from its refining and trading activity. The stated objective of the trading joint venture is to expand its global presence over time.
The transaction is expected to close in Q3 2019, subject to customary closing conditions and regulatory approvals.