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2381

Governance: C

ARABIAN DRILLING

Arabian Drilling Co.

87.10 SAR / Share

As of: May 28, 2026

— P/E Ratio Trailing 12 Months

1.3x P/B Ratio Price to Book Value

— Dividend Yield Annual Dividend / Share

7.75B SAR Market Cap Total Valuation

1.00 Beta Systematic Risk Index

-4.3% Net Margin Net Profit / Revenue

The Story

Arabian Drilling Company is facing a challenging period of declining revenues, net losses, and a major debt maturity, despite its strong historical reinvestment and strategic expansion into the UAE.

Source: Q1 2026 (2026-05-10)

Value Creation -1.7% Excess Return on Capital (Spread between ROIC/ROE and Cost of Capital)

Cash Flow Payback — Estimated years of operating cash flows required to cover Enterprise Value

Performance & Distributions

Dividend Yield Trailing annual dividends paid relative to share price

—

Sustainable Growth Rate Rate at which company can grow internally using reinvested profits

+8.7%

Payout Ratio Percent of net profits distributed as dividends

—

Net Margin Net profit margin generated from total operational revenue

-4.3%

ROIC Return on Invested Capital

6.6%

Market Pricing Multiples

P/E Ratio Market value compared to corporate net earnings

—

P/B Ratio Market capitalization compared to corporate book value

1.3x

EV / EBITDA Operating multiple reflecting core operational leverage

9.8x

EV / SALES Asset pricing multiple relative to total topline revenue

3.0x

Growth Story

Arabian Drilling's revenue trajectory shows a contraction, falling from SAR 3.62 billion in FY 2024 to SAR 3.43 billion in FY 2025, and further down to a TTM level of SAR 3.34 billion. This decline is highlighted by Q1 2026 revenues of SAR 821.6 million compared to SAR 911.1 million in Q1 2025, driven by lower land rig activity and temporary suspensions of offshore rigs due to geopolitical tensions. Despite these headwinds, the company maintains a high 5-year average reinvestment rate of 130.82%, reflecting heavy capital expenditure (TTM Capex of SAR 745.9 million) to refurbish and procure rigs. This aggressive reinvestment, combined with a 5-year average ROIC of 6.63%, yields a sustainable growth rate of 8.68%. To secure future growth, the company has expanded geographically, establishing a branch in Sharjah, UAE, which commenced commercial operations in Q1 2026 to support potential new drilling contracts.

Profitability Dynamics

Profitability has deteriorated significantly, with TTM EBIT dropping to SAR 91.38 million, representing a thin operating margin of 2.73%, down from an operating income of SAR 801.23 million in FY 2023. This margin compression, exacerbated by a SAR 114.3 million rig impairment in FY 2025 and rising finance costs, has dragged TTM net income into negative territory at -SAR 143.39 million (a profit margin of -4.29%). Historically, the company has struggled to cover its cost of capital, with a 5-year average ROIC of 6.63% falling short of its WACC of 8.35%, creating a negative value gap of -1.72%. While offshore rigs continue to deliver stronger segment results (SAR 88.5 million in Q1 2026) compared to land rigs (SAR 4.1 million), the overall business is currently destroying economic value as it grapples with high fixed depreciation costs and operational suspensions.

Risk & Capital Structure

Beta Systematic market risk indicator relative to the TASI index

1.00

Cost of Equity Minimum required rate of return demanded by shareholders

8.7%

WACC Weighted average cost of total debt and equity funding

8.4%

Debt-to-Equity Ratio Proportion of corporate funding financed by debt creditors

37.6%

Risk Factors

The company's risk profile is dominated by a looming liquidity squeeze and regional volatility. Total debt stands at SAR 2.92 billion, primarily consisting of a SAR 2.0 billion Sukuk due in February 2027. Because this Sukuk is contractually repayable within twelve months, its reclassification to current liabilities has caused current liabilities to exceed current assets by SAR 1.5 billion, triggering a breach of a 1:1 current ratio covenant. Although management secured a waiver valid until March 2027 and is in advanced discussions for alternative refinancing, this technical default underscores refinancing risk. Additionally, the ongoing Middle East conflict has led to customer-initiated suspensions of offshore rigs, presenting operational risks. While the company's leverage ratio of 0.75 remains well below its borrowing limit of 2.5, and it holds SAR 325 million in unutilised working capital facilities, its relevered beta of 1.00 reflects market-average systematic risk compounded by these acute localized pressures.

Governance Disclosures

Rating: C

We track 11 key governance and oversight matters for this company in our database.

Significance: 6/10 Info Asymmetry

Related-Party Transactions and Receivables with Schlumberger Middle East S.A.

The Group has a significant business relationship with its affiliate, Schlumberger Middle East S.A. (SMESA). As of March 31, 2026, the outstanding balance due from SMESA was SAR 142,938,134, compared to SAR 192,696,919 as of December 31, 2025. No allowance for expected credit loss was recognized for this balance.

Mitigating Factors: The revenue transactions were made on terms and conditions agreed between the Company and the related party.

Significance: 4/10 Tunneling

Key Management Personnel Compensation

Total compensation for key management personnel in 2025 amounted to SAR 25,940,205, which includes salaries, short-term benefits, post-employment benefits, and directors' fees.

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In-Depth Analysis