Abu Dhabi National Oil Company (Adnoc) has announced it is selling a 5 per cent stake in its drilling business to US-based energy services firm Baker Hughes, a GE Company (BHGE), for $550m.

Adnoc said in a statement that its drilling business is worth $11bn, including $1bn worth of net debt.

It was reported in May that BHGE was eyeing a slice of the Adnoc drilling unit.

The board of directors of both companies have approved the deal, which is expected to close in the current quarter, with commercial operations set to begin in 2019.

The transaction will give BHGE a seat on Adnoc Drilling’s board, the statement said.

Adnoc Drilling expects to generate stable annual dividends for both shareholders, with an estimated long-term yield in the range of 7 per cent a year.

The "transaction includes an activity and milestone-based deferred consideration mechanism, beginning in 2023, linked to the development of Adnoc's new conventional and unconventional development programme," the statement said.

Offloading the 5 per cent stake in its drilling unit is part of Adnoc's larger strategy to reduce drilling time by 30 per cent by the end of 2019.

Adnoc plans to grow its conventional drilling activity by 40 per cent by 2025 and ramp up its number of unconventional wells, a goal of its 2030 growth strategy.

As part of the agreement, BHGE will also provide technology, software, equipment and training support to Adnoc Drilling.

Baker Hughes is currently preparing to separate from its parent company General Electric (GE) after the latter announced its decision in June to divest its oil and gas business, just a year after acquiring the former.