Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ADNOC Gas PLC (ADX:ADNOCGAS, Financial) achieved an 18% year-on-year increase in Q2 EBITDA, maintaining a strong EBITDA margin of 34%.
- The company generated $1.19 billion in adjusted net income, up by 21% year-on-year.
- ADNOC Gas PLC (ADX:ADNOCGAS) delivered free cash flow of $1 billion in Q2, contributing to a strong free cash flow generation of $2.2 billion in H1 2024.
- The company announced an interim dividend of $1.706 billion to be paid in Q3 2024, with a final dividend expected in Q2 2025.
- ADNOC Gas PLC (ADX:ADNOCGAS) maintained a world-class reliability rate of 99.7% across all operations and achieved zero TRIR in Q2 2024, reflecting strong operational excellence and safety performance.
Negative Points
- Despite the positive financial performance, the sales volume only increased by 1% year-on-year, indicating limited growth in this area.
- The company faces significant CapEx commitments, with $430 million spent during the quarter and more expected in the future.
- ADNOC Gas PLC (ADX:ADNOCGAS) has a high dependency on favorable pricing environments for LPG and Naphtha, which can be volatile.
- The company’s growth projects, such as Ruwais LNG, require substantial investment and carry execution risks despite securing international partners.
- The transfer of the ESTIDAMA project to ADNOC group, while optimizing capital efficiency, means ADNOC Gas PLC (ADX:ADNOCGAS) will incur usage fees, potentially impacting future profitability.
Q & A Highlights
Q: Can you help us understand the economics of the [estate Dalma] project, including the CapEx spent so far and its impact on profitability?
A: Peter van Driel, CFO: ADNOC Gas processing was historically a cost-plus business with no profitability objective. With the listing, our focus shifted to growing profitability. The [estate Dalma] project is an infrastructure project, which typically does not yield the high returns we seek. Therefore, transferring it to another entity optimizes our capital investment. This will reduce our OpEx and depreciation, and we will pay a fee for using the infrastructure in the future.
Q: Is there a chance that the dividend policy might be revised before 2027, given the developments in Ruwais LNG and other projects?
A: Peter van Driel, CFO: The timing of acquiring Ruwais LNG, whether now or later, will not impact the capital outlay significantly. We are currently evaluating our growth prospects and capital investment needs. Once we have a clearer picture, we can decide on the timing of bringing Ruwais LNG onto our balance sheet. This will ensure a balanced investment program.
Q: Is ADNOC Gas looking to invest internationally as part of its growth plans? If so, what kind of assets and geographies are being considered?
A: Peter van Driel, CFO: While we do not rule out international M&A, our focus remains on high-return projects within the UAE. Any international M&A would need to have a clear strategic fit and align with our risk appetite. The focus would be on LNG opportunities that match our predictable margin business model.
Q: Could you help us understand the dynamics driving LPG prices despite seasonally lower demand during the summer?
A: Peter van Driel, CFO: LPG prices are influenced by its use as a feedstock for refineries, which have the option to choose between LPG and other sources. Last year, refineries favored other sources, causing a price disconnect. This year, favorable pricing dynamics have reconnected LPG with other feedstocks. However, predicting long-term LPG prices is challenging due to market dynamics.
Q: How will the transfer of the [estate Dalma] project impact your EBITDA going forward?
A: Peter van Driel, CFO: The transfer will reduce our depreciation and OpEx. We will pay a tariff-based charge for using the infrastructure, which is more favorable as we only pay for actual usage. This will benefit our net income compared to owning the project outright.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
