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Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.

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Make sure you're subscribed to stay up to date with new episodes.

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Thanks for listening, and now onto today's show.

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Hi, thank you for joining us on HSBC's Perspectives.

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I'm joined today here with Youssef Salem, CFO at North Drilling.

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It's a great pleasure to host you.

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My name is Nabil Elblushi, Head of Markets and Security Services, Minat.

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My pleasure.

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Thank you for having me in the podcast.

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Thank you for having me in the conference.

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It's such an incredible conference.

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Thanks.

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Thank you for making the time to join us at the conference.

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How's your schedule looking at the conference?

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Fully packed, which is how we want it to be.

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So the busier it is, the better it is.

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So it's a packed couple of days, which is always is with you.

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I think this has always been an incredible event for us.

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It also comes off the back of the HSBC, the Hong Kong, the Global Investment Summit, which was also...

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great for us.

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And it's great because between this Hong Kong and then also your Dubai event, we're pretty much able to meet and capture all the global EM investors, which is critical for us because today almost two thirds of our free float sits in global EM funds.

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So being able to address them across different locations, meet their PMs, their analysts.

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Adnogdulin today is the most, pretty much kind of one of the highest overweight investors.

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stocks by global EM investors, being able to really engage with them in a meaningful way.

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These conferences have really helped massively and been a very critical part of that journey.

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Excellent.

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And obviously, it's quite topical to have direct access to investors in person to relay the reality of the story and how adnock drilling is performing.

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I'm sure there were conversations around the resilience of adnock drilling on the backdrop of the geopolitical situation in the region.

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Yeah.

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Is that something you want to touch on?

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Absolutely.

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This is resilience in action, right?

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The business has always been resilient contracts, right?

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And investors always understood this, that we operate on long-term, take-ward pay, minimum guaranteed return, fixed price, cost-plus exclusive contracts.

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Yeah.

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This has now been kind of tested.

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It's been tested before in COVID.

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It's now been tested again in a different way.

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And every time it's tested, it shows really how the business is proof and is immune to any external events.

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Since the event started, we have published our Q1 results, which came in line with guidance.

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We have also guided on Q2 to be broadly in line with Q1.

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And we've reiterated and reaffirmed our full year guidance.

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So we're effectively able to completely still deliver on the expectations.

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And this comes off, we've now had 11 quarters in a row where we've had a beat of consensus.

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So it's really steadily delivering business regardless of the external circumstances.

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Excellent.

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Excellent, Yusuf.

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So shifting gear a bit, I understand now the conversations have gone through, but you also have gone out with a change in strategy where you want to split the revenues into 50%.

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the conventional drilling business activity and 50% into added services.

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Can you elaborate a bit more on that and what is the context of added services?

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Definitely.

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It's a continuation of our strategy.

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So until 2018, we were a pure drilling company where 100% of our revenue came from drilling.

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Since 2019, we've basically established the oil field services segment, which basically means that today, not only do we drill the wells for the client, but we're able to offer end-to-end services on effectively this way.

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Ongoing services throughout the life of the client.

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Exactly.

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Exactly.

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Throughout their full life cycle.

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And today, that business represents 30% of our revenue and 10% of our bottom line.

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And what this does, one, is it offers clients effectively a one-stop shop to be able to deliver all the services that they need.

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It creates more energy security and independence in the UAE by being able to have these local capabilities to deliver on that.

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It obviously increases our growth.

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So today, effectively, that business now generates $1.5 billion of revenue a year.

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So that effectively helped us over the last four years, more than 2.5x our revenue and our bottom line since we've listed.

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And it creates a diversification for us in country because not only are we making money when we construct these wells at the beginning, we also make money.

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Exactly.

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through their entire life cycle.

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It's a value chain integration, I would say, because it's quite relevant and quite aligned to the core activity, which is drilling.

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Exactly.

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And now effectively we're taking this further by also vertically integrating these services, not only through the service delivery, but also through the equipment and manufacturing and engineering part of it,

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to also be able to gain more market shares, both with expanding horizontally across the well-value chain, as well as expanding vertically in each part of the value chain to capture a bigger portion of that spend and again build a lot of that capabilities and IP in-house.

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And that's also, for example, where we've established Enersol, which is our technology arm, where we now have 140 patents sitting inside that platform, where we now own a lot of the IP behind these capabilities.

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Another area of diversity, which I see the company is quite active in, is diversification of markets that you operate in.

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And I understand there are expansions that have already happened and potentially further expansion to diversify the geography where you operate.

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Is this something you can enlighten us on?

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Absolutely.

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And we think of this as growth diversification, not risk diversification.

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From a risk perspective, we're fully comfortable with the UE.

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It's our home market.

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It's been resilient to every event that happened.

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And we very much pride ourselves on being a real UE play that really provides a proxy to all the great ambitions and plans that we see in the country.

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However, in order to also diversify our growth, where not only do we grow in line with the UE market growth and even faster by capturing more market share domestically, but also we capture more market share regionally.

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in countries which are also expanding in an incredible way.

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Look at a country like Kuwait today, ramping up from three to four million ballots per day.

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And again, demonstrating massive resilience.

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You look at even with the current situation, all our rigs in Kuwait are continuing to operate and drill.

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We now have 30 rigs across the region outside the UE between Kuwait, Oman and some in Bahrain.

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And again, the resilience these countries have shown in the middle of the events to continue their plans, because the unique things about the GCC is these countries are kind of guided by long term

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Absolutely.

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They're not disrupted by it.

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actually resulted in tactical changes?

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Is it looking at potentially more drilling activity given the elevated prices expected in the medium to longer term?

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Is it new technology, more resilient activity?

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And so if that's something you want to touch on.

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Definitely.

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So as you said, with the current situation, you definitely have more demand for energy and energy security, right?

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Because clients are looking for how can I diversify my energy sources, how I can build more storage, how can I increase my strategic reserves and all of this.

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And all of this is...

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creating elevated demand in the medium term that we effectively can benefit from as a drilling company.

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So that's definitely the case.

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Two is definitely local capabilities.

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Again, countries would look at how can I make sure that I can build more local capabilities, more supply chain capabilities, more local business resilience and business continuity capabilities.

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So because the way we operate is local in every country we go in.

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So as we even went into Oman, Kuwait and Bahrain, we go by partnering in with local players in these countries and building these presence and capabilities locally on the ground.

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So we're able to be this reliable company, this is local everywhere it operates, effectively to provide this business continuity regardless of the external environment.

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In today's age, we can't have a conversation without touching on AI and technology.

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So your area of business is quite conventional, quite traditional, but I'm sure there's an element of technology in AI.

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Is there something you want to share with us?

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Definitely.

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It's actually perfect timing because our latest batch of six rigs, which have now started arriving and operating in the country across this year and next year,

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are what we call the AI enabled or part autonomous rigs.

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So around half of the workflows that we have on these rigs become effectively automated.

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So the drilling process where you're drilling, the tripping process, et cetera, which are the different parts of the kind of the value chain and the life cycle of the drilling process

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become automated, become autonomous.

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So no longer you have someone pressing a button or someone manually deciding on this, but rather these are automated processes.

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Obviously at the beginning, these are rules-based processes.

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And then over time, these evolve into more of AI, machine learning processes.

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Also in the process of transforming all our rigs to have the cameras on them to be linked with a computer vision module, to be able to potentially pre-alert for any potential accidents, et cetera.

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So a lot of different things.

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We have a sister company, AIQ, which is

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partially owned by Adnok and part by Preside, the publicly listed company, which has developed a big suite of different products with different industry partners.

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So we also now have with different partners, we have with SLB, the autonomous directional drilling, the autonomous well planning, so a lot of autonomy in the way we're doing things.

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And this is great because one, it allows you to move people off hazard way and effectively move people from the rig floor.

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Safety element is material.

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Exactly, 100%, because now they sit in remote operation center, remote control center, as opposed to on the rig floor.

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you also elevate the type of work that they do because they're actually able to focus more on the analytics side.

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More added value.

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Exactly.

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And obviously it increases the efficiency on the rig operation.

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So it becomes a safety benefit, performance benefit, and financial benefit.

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Capacity as well, definitely, definitely.

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Anything you want to conclude with?

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As I can understand, your schedule is very busy.

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I want to thank you, to be honest, because I think obviously HSBC has been an incredible partner to us alongside this journey.

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We've mainly be listed the company and since then has been an incredible partner to us, whether it's on the equity side, on the engagement, but also on the credit side.

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So great privilege again to have you here.

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Relationship and a partnership we value equally.

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We would continue to grow as you grow in your area of business and you've got full support from us.

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Thank you so much.

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Thank you for joining us at HSBC Global Viewpoint.

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We hope you enjoyed the discussion.

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