Arabian Drilling: Q2 Preview: Better-than-feared quarter inbound; optimism reinforced by improving geopolitics

研报英文原文证据摘录

Arabian Drilling: Q2 Preview: Better-than-feared quarter inbound; optimism reinforced by improving geopolitics

Alex Comer AC CEEMEA Equity Research

(44-20) 7134-5945 16 July 2026 J P M O R G A N

alex.r.comer@jpmorgan.com

Investment Thesis, Valuation and Risks

Arabian Drilling (Overweight; Price Target: SRls99.00)

Investment Thesis

Arabian Drilling Company (ADC) is one of the leading oil drillers in Saudi Arabia and has

been operating for more than >50 years with Saudi Aramco being its largest and most

important customer. ADC rig fleet is skewed towards the onshore segment. The rollback of

the 13 mbd MSC target by the KSA and the resultant rig suspensions by Aramco dampened

the outlook for the oil drillers in the KSA, but with rigs now being recalled to the KSA and

with Saudi Aramco still pushing ahead to increase its gas production by >60% by 2030,

ADC is in a good position to benefit from increased drilling activity in the KSA. We also

think the dividend will be reinstated for FY2026, together with a significant uplift in

earnings with rigs returning to work. We rate the stock OW.

Valuation

We typically use a DCF methodology to value the companies under our coverage, but also

pay attention to dividend yield, comparable company trading multiples, as well as other

indicators such as P/B and EV/Replacement cost.

Our DCF valuation of ADC gives us a Dec-27 target price of SAR 99/share, using a CoC

of 8.0% and a long-term growth assumption of -1%.

Risks to Rating and Price Target

• Onshore and offshore day rates may decrease when/if the jack-up market loosens

• Saudi 10-year bond yields may increase sharply resulting in a higher cost of capital

• Saudi Aramco may cut back on oil production again, resulting in a reduction in drilling

activity