By: AGBI

Abu Dhabi state oil company Adnoc‘s part-privatisation of four subsidiaries has diversified and deepened the UAE capital’s stock market and offered investors a means to gain exposure to the emirate’s vast energy reserves.

The quartet are trading at cheaper valuations than the broader Abu Dhabi stock index and offer reasonable dividend yields despite making huge share-price gains since listing on the bourse, AGBI research shows.

Each has a distinct specialism. Adnoc Gas processes natural gas; Adnoc Drilling provides drilling and oil rig-related services to its parent; Adnoc Distribution operates Adnoc’s fuel stations and grocery stores; and Adnoc Logistics & Services provides marine, logistics and shipping services.

The largest is Adnoc Gas. Its business is split roughly evenly between domestic gas sales and exports of liquids such as propane, butane, naphtha and liquefied petroleum gas.

Ahmed Hazem Maher, an equity research director at EFG Hermes in Cairo, described Adnoc Gas’s business model as “excellent”. He said its domestic gas production and supply operations were almost utility-like in the reliability of their returns, while the export-focused liquids business provides significant potential earnings upside.

“It’s a great mix of cyclicality along with the defensiveness of a utility to anchor the business,” he said.

Adnoc Distribution listed in 2017, while Adnoc Drilling did likewise in 2021; Adnoc Logistics & Services and Adnoc Gas went public in 2023. The latter floated additional shares last year, nearly doubling its free float to 9 percent.

In terms of share price gains since joining the bourse, Adnoc Logistics has nearly tripled and Adnoc Drilling is up 140 percent. Adnoc Gas and Adnoc Distribution have gained 57 and 64 percent respectively.

Adnoc Gas has a 12-month trailing price-to-earnings (PE) ratio of 13.8, the lowest among the four companies. Adnoc Distribution has the highest at 18.6. These compare with a combined PE for the Abu Dhabi stock index of 20.4, Bloomberg estimates.

Adnoc Gas’s PE will probably rise to about 16, assuming its share price is unchanged, as a result of its fourth-quarter profit drop, said Oliver Connor, director of energy equity research at Citi in London. But the ratio should decline again as output expands, he added.

“It’s more a question of what equity investors are willing to pay today for a future increase in earnings,” Connor said.

Adnoc Gas reported a 3 percent rise in 2025 net profit – and a 15 percent fall in fourth-quarter profit – on Monday.

Revenue is likely to increase substantially from 2028-29 as three major initiatives – the three-phase Rich Gas Development project, Ruwais liquefied natural gas project and Bab Gas Cap – begin production.

These should raise output by more than 30 percent by 2029 and coincide with parent Adnoc upping crude oil production capacity to 5 million barrels per day.

“That means more raw gas is coming our way, so our first step was to de-bottleneck our existing infrastructure,” Peter van Driel, Adnoc Gas chief financial officer, told reporters on Monday.

Last June, Adnoc Gas awarded $5 billion in contracts for the first phase of Rich Gas Development. The company will probably take a financial investment decision regarding the second and third phases by March 31, said Van Driel, who also predicted it will do the same for Bab Gas Cap by the end of the year.

“The big story for the company is that it’s getting much closer to executing on these large projects,” said Citi’s Connor.

Citi and EFG Hermes have buy recommendations on Adnoc Gas, setting share price targets of AED4.00 and AED4.15 respectively. The stock ended Monday at AED3.72.

EFG Hermes forecasts Adnoc Drilling will make a fourth-quarter net profit of $364 million, near-flat versus the prior quarter. Its earnings should increase steadily from 2026, said Maher, who has a buy recommendation and a price target of AED6.40.

“Adnoc Drilling is one of the best defensive equity investment stories in the region across all sectors given how the contracts with its parent are financially structured to provide a guaranteed rate of return,” added Maher.

“The parent is growing and is deploying a lot of capex, so as its volumes increase, so too will the revenue of Adnoc Drilling and demand for its services.”