Arabian Drilling Tough 2026 ahead but strong gearing to potentially tighter rig markets

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Arabian Drilling Tough 2026 ahead but strong gearing to potentially tighter rig markets

Alex Comer AC CEEMEA Equity Research

(44-20) 7134-5945 18 May 2026 J P M O R G A N

alex.r.comer@jpmorgan.com

Earnings estimate changes

Figure 1: Estimate changes

Source: J.P. Morgan estimates.

FY26 Update

Modelling FY26 is subject to a high degree of forecast error given the uncertain outlook

for the remainder of the year. The company gave updated guidance in Q1 results: 1) Q2

revenues expected to decline ‘up to 12.0%’ qoq due to offshore suspensions, and 2) full-

year capex guidance revised down from cSAR 750m down to SAR 700m.

The key determinant for the year will be the duration of suspensions in the offshore

segment. Suspensions of ‘some’ offshore rigs were announced toward the end of March,

and a rig that was set to resume operations in April did not do so. Based on our

discussions with the company and our estimates, we believe that 5 offshore rigs have

been suspended, which we assume to be out of action for the whole of Q2. In our base

case, we assume that these rigs restart in Q3 (but could yet be proven wrong) and

assume that the rig earmarked for April returns in Q4. However, we caution that Q3 &

Q4 offshore revenues could be half our current estimates if resumptions don’t occur as

we expect. This has obviously resulted in a cut to our FY26 offshore estimates.

In the onshore segment, two onshore rigs re-entered the active fleet in Q1 but we model

no further additions to the active fleet. Furthermore, there is downside risk that the

company does not win the re-tender for the 11 LSTK gas rigs with SLB and whilst the

contract for these rigs has been extended to August-26, the results of the re-tender are