ADNOC Gas and ADNOC Drilling: Profit Resilience in a Low-Price Environment

In an energy landscape marked by volatile oil prices and the accelerating transition to cleaner fuels, ADNOC Gas and ADNOC Drilling have emerged as standout performers. Their ability to generate record profits despite a challenging market environment underscores the power of strategic operational diversification, margin visibility, and long-term contract discipline. For investors seeking defensive, high-margin exposure in energy infrastructure, these two pillars of Abu Dhabi National Oil Company (ADNOC) offer a compelling case study.

Strategic Diversification: The Backbone of Resilience

ADNOC Drilling's Q2 2025 results exemplify how operational diversification can insulate a business from commodity price swings. The company reported a 19% year-on-year (YoY) surge in net profit to $351 million, driven by a 28% revenue increase to $1.2 billion. This growth was fueled by its expansion into unconventional drilling—a sector that now contributes significantly to its revenue. By drilling over 60 unconventional wells in the first half of 2025 and targeting 100 by year-end, ADNOC Drilling has capitalized on higher-margin integrated services, which saw a 121% revenue jump in Q2 alone.

Meanwhile, ADNOC Gas leveraged its dominance in the domestic gas market to achieve a record $1.385 billion net income in Q2 2025, a 16% YoY increase. Despite a 4% decline in revenue to $4.657 billion, the company's EBITDA rose 8% to $2.256 billion, reflecting improved operational efficiency and favorable pricing in both local and LNG export markets. Domestic gas sales grew 3% YoY, with divisional earnings from this segment surging 23% to $920 million.

Margin Visibility Through Long-Term Contracts and Cost Optimization

Both companies benefit from long-term contracts that provide pricing stability and margin visibility. ADNOC Drilling's fleet expansion and improved rig utilization—supported by strategic joint ventures like its 70% stake in SLB's land drilling rigs in Kuwait and Oman—have enhanced its ability to secure high-margin work. The company's AI-driven tools, such as MEERAi and Enersol, further optimize operations, reducing downtime and boosting efficiency.

ADNOC Gas, meanwhile, has locked in competitive pricing through long-term domestic gas agreements, ensuring steady cash flows even as oil prices dipped. Its $5 billion investment in the first phase of the Rich Gas Development (RGD) project, part of a $20 billion CAPEX plan, is designed to maximize value from every molecule of gas processed. This includes advanced CO2 capture technology, aligning with ADNOC's broader decarbonization goals while enhancing profitability.

Defensive Growth in the Energy Transition

ADNOC Gas has positioned itself as a key player in the global energy transition. Its recent $400 million LNG supply agreement with Germany's SEFE Securing Energy for Europe—delivering 0.7 million tonnes of LNG starting in 2025—highlights its role in supporting international energy security. The company is also advancing the Ruwais LNG project, aiming to capture a larger share of the growing LNG market.

Simultaneously, ADNOC Gas is pioneering carbon capture and utilization (CCU) technologies. Partnerships with Levidian and Flowserve, as well as its involvement in a Direct Air Capture (DAC) hub with Occidental, underscore its commitment to reducing emissions while creating value. These initiatives align with ADNOC's $23 billion 2025 investment in lower-carbon solutions, reinforcing the company's long-term sustainability roadmap.

Investment Implications: High-Margin Infrastructure Plays

For investors, ADNOC Gas and ADNOC Drilling represent a rare combination of defensive characteristics and growth potential. ADNOC Drilling's disciplined regional expansion, shareholder returns (including a $217 million Q2 dividend), and AI-driven efficiency gains position it as a high-margin infrastructure play. Its raised full-year net profit guidance—from $1.35 billion to $1.375 billion—reflects confidence in sustained performance.

ADNOC Gas, with its robust EBITDA margin of 36% in H1 2025 and a 5% increase in its interim dividend to $1.792 billion, offers a compelling yield and reinvestment potential. Its inclusion in the MSCI Emerging Markets and FTSE indices has attracted over $700 million in capital inflows, enhancing liquidity and broadening its investor base.

Conclusion: A Blueprint for Energy Transition Resilience

ADNOC Gas and ADNOC Drilling demonstrate how strategic diversification, margin visibility, and technological innovation can drive profitability in a low-price environment. As the energy transition accelerates, their focus on unconventional drilling, LNG expansion, and carbon capture positions them to thrive in both traditional and emerging markets. For investors seeking resilient, high-margin exposure to energy infrastructure, these two ADNOC subsidiaries offer a well-structured, forward-looking opportunity.

Investment Advice: Consider a long-term position in ADNOC Gas and ADNOC Drilling, leveraging their strong balance sheets, margin visibility, and alignment with global decarbonization trends. Monitor their CAPEX allocations and EBITDA guidance for further signals of sustained growth.