Adnoc Gas reports 8% rise in third-quarter profit on domestic business boost

Adnoc Gas reported a nearly 8 per cent annual rise in net income for the third quarter, as its domestic gas business drove profit despite a slump in global hydrocarbon prices.

Net profit in the three months that ended in September rose to a record $1.34 billion, the unit of energy major Adnoc said in a regulatory filing to the Abu Dhabi Securities Exchange, where its shares trade.

The domestic gas business of the company delivered a 26 per cent year-on-year rise in earnings before interest tax, depreciation and amortisation (Ebitda) to $914 million.

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The company attributed the “strength of the UAE economy” as the primary driver of a 4 per cent increase in domestic gas sales volumes in the January to September period.

Higher underlying margins following structural improvements from contract renegotiations, also boosted profitability.

“Our record Q3 results, and strong year-to-date performance are a testament to the resilience and adaptability of our business model,” said chief executive Fatema Al Nuaimi.

“Our profitability continues to grow, even while oil prices are down. Despite a lower oil price environment, we continue to deliver robust returns, underpinned by operational excellence and improved commercial agreements.”

Adnoc Gas, estimated to have the seventh largest natural gas reserves globally, supplies about 60 per cent of the UAE’s gas sales needs and supplies end-customers in more than 20 countries.

For the first nine months of the year, the company recorded a 10 per cent annual increase in net profit to $3.99 billion. The company's Ebitda and net income margin rose to 36.6 per cent and 22.2 per cent, respectively, between January and September, despite oil prices averaging $71 per barrel compared with $83 per barrel in the same period last year.

Volatile oil prices

Oil prices have remained volatile this year amid the Gaza war, as well as the conflict between Russia and Ukraine. While fears of oil and gas supply disruptions caused sharp, short spikes, slowing economic growth and concerns of oversupply amid an easing of output caps by Opec+ have dragged crude prices lower.

Earlier this month, Opec+ decided to raise production by 137,000 barrels per day for December, similar to the increases in October and November. On Thursday, Brent, the benchmark for two thirds of the world's oil, was down 0.06 per cent to $62.67 a barrel at 10.34am UAE time. West Texas Intermediate, the gauge that tracks US crude, was trading 0.12 per cent higher at $58.42 a barrel.

Good proposition

Adnoc Gas said its earnings momentum made it a "high return investment with predictable cash flows and strong upside potential". The company has also introduced quarterly dividend distributions starting from the third quarter of this year, with $896 million to be paid by December.

The 5 per cent annual increase in dividend payout extended until 2030 "offers greater transparency" and allows investors to "participate in the broader energy transformation of the UAE", the company added.

Adnoc Gas has sought to expand its customer base internationally in recent years. In August, it signed a 10-year preliminary agreement with Hindustan Petroleum Corporation to supply 500,000 tonnes of liquefied natural gas to the Indian fuel retailer.

In February, Adnoc Gas signed a 14-year deal to supply up to 1.2 million tonnes per annum of LNG to state-backed Indian Oil. The agreement is valued at between $7 billion and $9 billion, Adnoc Gas said at the time. Indian Oil is set to become the largest buyer of LNG from Adnoc by 2029, it added.