ADES CEO cites lower insurance costs, upbeat offshore drilling outlook

Mohammed Farouk, CEO and Vice Chairman of ADES Holding Co., said war-risk insurance costs have seen a tangible decline compared with the first half of 2026.

This drop is expected to bolster profit margins, although the ultimate cost remains tied to geopolitical developments and insurance market conditions, Farouk highlighted during an interview with Argaam.

He added that the geographic diversification of the company's operations across GCC countries and external markets provide flexibility to navigate disruptions or cost spikes in any particular region.

Regarding global demand for drilling rigs, Farouk said ADES maintains a positive outlook for the global shallow-water offshore drilling market, supported by ongoing demand driven by the need to offset natural field decline, preserve production capacity, and strengthen energy security.

Farouk explained that supply-side dynamics remain an important factor, given the severe limitations on the availability of new drilling rigs and the continued tight supply of high-specification jack-up offshore rigs. The latest market estimates place global offshore jack-up utilization at around 90%, he noted.

Moreover, higher oil prices support oil companies' cash flows and capacity to invest in exploration and production activities. However, energy security and the need to counter natural production declines are more structural drivers of drilling services demand than short-term movements in oil prices, according to the top executive.

The CEO also noted that geopolitical tensions may trigger short-term operational disruptions, such as those witnessed in the Middle East. However, they simultaneously reinforce the strategic importance of energy security, supply reliability, and sufficient drilling capacity.

These factors will play a role in rebuilding strategic reserves, some of which have already been drawn down. There is a chance that such reserves elevate o higher levels in the future, he said.

Farouk emphasized that ADES' geographic diversity allows for asset allocation across different markets, while capturing the most attractive opportunities, reducing the group's reliance on a single region.

As for the new contract in Indonesia, its effective daily operating rate is nearly $106,000, a highly positive commercial level for the Southeast Asian market, Farouk revealed. He expects the contract's overall profitability to broadly align with profit margins generated by the company's offshore operations.

The contribution to the company's revenue and cash flows as a result of that contract will be concentrated mainly in 2027, with a limited contribution in early 2028.

According to Argaam data, on Oct. 27, ADES announced signing a new contract for its jack-up rig Shelf Drilling Perseverance in Indonesia with PT Pertamina Hulu Mahakam (PHM), for approximately SAR 173.14 million ($46.17 million) for both the firm and optional periods. Operations are expected to begin around late December 2026.