Arabian Drilling Co. (2381)

Equity Research 14 September 2026 | 11:19AM GST

Arabian Drilling Co. (2381.SE): Signs an additional 5Y tender for 8 LSTK existing land rigs from 4Q26; adding ~SAR2bn to backlog; Neutral

This morning, Arabian Drilling announced the signing of a 5Y contract with SLB Faisal AlAzmeh, CFA | for the provision of 8 additional land rigs for Gas LSTK operations, further Goldman Sachs International increasing the company’s LSTK gas rig fleet to a total of 19 units (see here for our Roman Reshetnev note on Arabian Drilling’s 11-gas SLB land rig LSTK award). | Goldman Sachs International The release states that the awarded rigs will be redeployed from the company’s Fadi Bataineh existing available land rig fleet and are set to contribute ~SAR2bn to the company’s | backlog, with revenue contribution expected to begin in 4Q26. This follows the Goldman Sachs International company’s initial 11-gas land rig LSTK announcement in late August, and together Swarnilee Patra | the two awards add approximately SAR5bn to backlog across a total of 19 rigs, Goldman Sachs India SPL taking total backlog to a record ~SAR16bn, marking the largest Gas LSTK commitment secured by the company to date, and maintaining its 100% share of domestic gas LSTK operations.

Following this announcement, we expect investor focus to remain on: (i) any insight into fleet expansion given this award - like the initial 11-rig contract - is drawn from the existing land fleet and is not incremental to the company’s asset base; (ii) per-rig day rate and contract economics given an onshore operational profile that is set to operate a total of 19 rigs for Gas LSTK participation; (iii) the pace of deleveraging (ND/EBITDA of 2.2x in 2Q26, flagged by the company as the peak for the year); (iv) the full run-rate margin profile for the onshore segment given the cost-optimization program, LSTK packaged rigs, and the international margin profile following the company’s recent regional awards announcements; and (v) the potential deployment of growth capex (organic or inorganic) relative to the pathway toward dividends resumption.

GS view. We expect the stock to react positively to this announcement, particularly given the recent correction (ADC is down ~5% YtD following Sunday’s close) in the Saudi energy space following recent headlines. We believe the award reinforces Arabian’s LSTK positioning in the Kingdom’s domestic gas expansion pipeline and bodes well for the company’s earnings visibility. That said, we still highlight the rigs as redeployed from the existing land fleet and do not add to the asset base, so while the SLB relationship in total now contributes ~SAR5bn of backlog, the announcement supports existing onshore fleet utilization rather than new deployments. We think this still generally limits headroom for growth relative to peers in the region like ADES/ADRILL (both Buy-rated), particularly at ADC’s current ND/EBITDA and given suspended dividends. We do see scope for the cost-optimization program to drive some margin upside in the near-to-medium

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Goldman Sachs Arabian Drilling Co. (2381.SE)

term, and we believe there is room for 3Q/4Q26 contribution to be incremental to guidance/consensus (2Q26 management call’s guidance at ~+4-6% QoQ revenue growth in 3Q26) given the full resumption of suspended KSA rigs earlier this quarter, the rig deployment to Oman, and the likelihood that the 11-gas land rig LSTK awards reflect a partial run-rate in 3Q26 due to deployment timing, with fuller realization from 4Q26 onwards. We believe ADC’s current valuation reads as fair when we weigh the dynamics between the near- to medium-term deleveraging, cost savings…