Saudi Aramco Confirms "World's Most Valuable Company" May Go Public

Tyler Durden's picture




 

On Thursday we explained the upcoming IPO of the world’s most valuable company: Saudi Aramco, Riyadh's state-owned crown jewel that’s the world’s most prolific crude producer.

The move comes as Saudi Arabia burns through cash and takes on debt in a desperate attempt to plug a yawning budget hole created by the largely self-inflicted pain from "lower for longer" crude.

Pressured by declining oil revenue, the cost of financing multiple regional proxy wars, and the necessity of maintaining costly subsidies for everyday Saudis, Riyadh is apparently resorting to what we called “a stunning Hail Mary”: privatization.

On Friday, the kingdom confirmed it's mulling plans to sell a stake in the company. Here’s the official statement:

Saudi Aramco confirms that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of an appropriate percentage of the Company’s shares and/or the listing of a bundle its downstream subsidiaries.

 

Once the study of these various options is complete, the findings will be presented to the Company’s Board of Directors which will make its recommendations to the Saudi Aramco Supreme Council.

 

This proposal is consistent with the broad and progressive direction pursued by the Kingdom for reforms, including privatization in various sectors of the Saudi economy and deregulation of markets, which the Company strongly supports.

 

Saudi Aramco would like to emphasize that this process will strengthen the Company's focus on its long term vision of becoming the world’s leading energy and chemical enterprise. This includes prudently managing the Kingdom’s hydrocarbon resources, adding value across the value chain, reliably meeting its customers’ demand, and meeting its stakeholder and environmental commitments. 

As we noted before, "Aramco has the largest known oil reserves at around 261bn barrels – almost 10 times more than Exxon Mobil." 

In order to get an idea of the sheer magnitude, consider the following chart which shows that when it comes to crude, no one does it like Riyadh:

Some more thoughts from RBS analysts this morning, which largely coincide with our own noted previously:

Saudi Arabia is reviewing an Initial Public Offering of the country’s national oil company Aramco, said Saudi Arabia’s Deputy Crown Prince and Defence Minister in an interview with the Economist. Saudi Arabia is currently the world’s largest producer of oil (10m barrels of oil per day), and Aramco has the largest known oil reserves at around 261bn barrels – almost 10 times more than Exxon Mobil. With Aramco’s total value likely to run in the “trillions of dollars” according to Saudi officials, the Saudi government’s discussion to sell a stake in its crown jewel is in order to plug the country’s fiscal deficit which has widened significantly as oil prices dropped 70% in 18 months (the Saudi economy is heavily reliant on oil, which accounted for 78% of its total exports in 2014). The government reported a fiscal deficit of $98bn in 2015 (15% GDP), and expects a deficit of $87bn in 2016 despite planned budget cuts.

 

Saudi’s firepower seems less impressive when compared with its fiscal deficit. In his interview with the Economist, Saudi Arabia’s Deputy Crown Prince alluded to the country’s significant firepower to combat lower government revenue from weaker oil prices; these include low government debt, high foreign reserves and the potential sale of national assets. However, at a budget deficit of around $87bn, the Saudi government may quickly deplete its available firepower; the country could burn through its foreign reserves or reach debt to GDP of 100% in around 7 years. In an environment of lower for longer oil prices, the government will need to look for more lasting solutions to its deficit problem and we therefore expect further budget cuts through lower subsidies and higher taxes.

 

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Fri, 01/08/2016 - 07:56 | 7016149 I AM SULLY
I AM SULLY's picture

Color me: not surprised.

This is a typical crony move - a way to build dirty cash and then "cash out".

(I will not be investing in this boondoggle)

Fri, 01/08/2016 - 07:57 | 7016156 So Close
So Close's picture

Common stock holders to be wiped out after they cash out?

Fri, 01/08/2016 - 08:01 | 7016169 VinceFostersGhost
VinceFostersGhost's picture

 

 

"World's Most Valuable Company"

 

Uh-huh.

Fri, 01/08/2016 - 08:08 | 7016188 pods
pods's picture

Small caveat:  If you happen to be caught selling or shorting this stock, you might be beheaded.

pods

Fri, 01/08/2016 - 08:39 | 7016307 SWRichmond
SWRichmond's picture

at the very least, in owning their stock you would be voluntarily supporting a regime which likes to behead people.  Kind of like buying US Treasury bonds, where we like to blow up wedding parties and such.

Fri, 01/08/2016 - 08:46 | 7016341 Stainless Steel Rat
Stainless Steel Rat's picture

"Prove we DON'T have the reserves... I _dare_ you."

Fri, 01/08/2016 - 09:10 | 7016466 balanced
balanced's picture

Step1: Push Russo-Iranian forces to the brink of war.

Step2: Sell $1 Trillion in Aramco stock at around $100 per/share.

Step3: Push Russo-Iranian forces over the edge, resulting in an attack on (or temporary occupation of) your oil fields.

Step4: Once Aramco stock plummets to around $5 per share, buy it all back. Profit around $950 Billion.

Step5: Get US forces in there to get your fields back, and/or make friendly deals with Russia to get them back.

Fri, 01/08/2016 - 08:39 | 7016310 janus
janus's picture

i do wonder what kind of due-dilligence will be preformed on these 'proven' reserves now that they're going public.

my bet is that the saudis only collateralize the down-stream subsidiaries and subdivide em into stocks. some books are never to be opened.

janus 

Fri, 01/08/2016 - 12:26 | 7017611 Citxmech
Citxmech's picture

Nobody sells a goose that's laying golden eggs.  Regarding disclosure - I'm sure the Saudis will be at least as honest and forthcoming as Alibaba. . . 

Fri, 01/08/2016 - 09:57 | 7016734 Kayman
Kayman's picture

And the royalties paid by Aramco to the Royal Family can be changed any time.  Sure sounds like a winner- for SA.

At least Alibaba had the sense to sell their IPO to the gullible public at the peak of the market, not the bottom.

Fri, 01/08/2016 - 08:35 | 7016287 CPL
CPL's picture

Everyone understands what happens once it's listed..."aaaaaand it's gone."

Fri, 01/08/2016 - 08:02 | 7016176 HowdyDoody
HowdyDoody's picture

Would you buy a secondhand oil well from the Saudis?

Fri, 01/08/2016 - 08:26 | 7016255 pods
pods's picture

Might be a bit less creepy than buying a secondhand camel that gets nervous when you walk behind it?

pods

Fri, 01/08/2016 - 10:08 | 7016786 Kayman
Kayman's picture

So this tourist is visiting Saudi Arabia and is walking through a bazaar. He looks through an opening to his left and sees a camel. There's an Arab with 2 bricks in his hands sitting on a stool directly behind the camel.  Smash ! The camels jewels are sheared clean off by the edge of the bricks. The tourist rushes over, "For crying out Loud he says, that's got to hurt." The old Arab looks up and says, "Oh no, just pull your thumbs back like this."

Fri, 01/08/2016 - 08:54 | 7016385 Stainless Steel Rat
Stainless Steel Rat's picture

Well, part one of the wealth extraction would be a bubble, so it might be fun for the ride up.

Fri, 01/08/2016 - 09:27 | 7016549 What is The Hedge
What is The Hedge's picture

And there you have it, the double-dog dare of all time!! Saudis say to USA, it’s put up or shut up. It’s time to protect us or the precious petrodollar is no more.

Fri, 01/08/2016 - 10:09 | 7016797 Kayman
Kayman's picture

And without Uncle Sam protecting the Beheaders, the Sauds are no more.

Fri, 01/08/2016 - 08:15 | 7016212 Angel_Eyes
Angel_Eyes's picture

Check this legitimate ways to mak? money from home, working on your own time and being your own boss... Join the many successful people who have already used the system. Only reliable internet connection needed, no prior experience neccessary, that's why where are here. Start here... www.wallstreet34.com

Fri, 01/08/2016 - 08:30 | 7016268 pods
pods's picture

Just remember to close those Angel Eyes quickly, unless you are doing the JOMG routine.

Fri, 01/08/2016 - 08:21 | 7016240 thetruthhurts
thetruthhurts's picture

I like a company that will say "Profits need to be up or heads will roll"  

Sounds like a solid BUY!

Fri, 01/08/2016 - 11:30 | 7017317 Commodore Decker
Commodore Decker's picture

Sauds are cashing out ahead of the war with Iran.

Fri, 01/08/2016 - 12:23 | 7017593 researchfix
researchfix's picture
""World's Most Valuable Company" May Go Public"

Seems like a good opportunity to get shares of empty oil wells.

Fri, 01/08/2016 - 07:57 | 7016155 DanTak
DanTak's picture

Desperate. They need another king.

Fri, 01/08/2016 - 08:01 | 7016167 buzzsaw99
buzzsaw99's picture

As RBS notes, "Aramco has the largest known oil reserves at around 261bn barrels...

Color me skepical.

Fri, 01/08/2016 - 08:24 | 7016246 Serfs Up
Serfs Up's picture

Does being public mean an independent third party audit of the company's assets?  

Will the findings be released to sharehodlers?

If so, then sign me up for one share.

Fri, 01/08/2016 - 10:12 | 7016813 Kayman
Kayman's picture

Correction-"Saudi Arabia claims to have the largest known oil reserves"  Aramco owns nothing.

Fri, 01/08/2016 - 08:01 | 7016168 FX223
FX223's picture

Just as the casino is about to shut the doors they offer the biggest jackpot ever.

Fri, 01/08/2016 - 08:08 | 7016171 falak pema
falak pema's picture

If Saudi Aramco goes public its the end of the petromonarchies as independent nation states.

They OPENLY become western satrapies and their royal families will live in exile like the ancient princes of Romanov Russia after the rise of the Soviets.

It means the end of Sunni Wahhabism and Jihad.

But what it will do to corrupt capitalism is another matter...

'Cos those who created the shale frack bubble and the dot.com and the QE Casino and the Sub PRimes are totally capable of running Saud's wealth into the black hole of Capitalism gone mad.

Their best bet would be to make Aramco a conglomerate OWNED by the wealthy Oligarchs of all continents and try and make that oil valuable BY LEAVING IT IN THE GROUND MOSTLY.

It will make for a better world that way than the shit hole of consumerism that the US model has created; which drowns us in four plastic continents floating on the acidic oceans and enuff polluted air to last us a century.

Fri, 01/08/2016 - 08:02 | 7016175 pliny the longer
pliny the longer's picture

this might be the best thing ever. they are freaking desperate, bullets soon (i know, there is all out war with yemen but nothing on facebook on it so it doesn't matter); i mean real war where people that matter stand to lose something .  . .

Fri, 01/08/2016 - 08:03 | 7016178 Omega_Man
Omega_Man's picture

another option is for Trump to go take it

Fri, 01/08/2016 - 08:56 | 7016393 ToSoft4Truth
ToSoft4Truth's picture

 

 

Technically, your neighbor kids will go take it for Trump.

 

That's if your neighbor kids don't kill you first when taking your guns for Obama.

Fri, 01/08/2016 - 08:05 | 7016179 Kina
Kina's picture

They are betting that if American corporations own enough of it the USA will have to continue to protect Saudi interests.

 

Actually pretty clever move by Suadis who must get the feeling the US is getting sick of them

Fri, 01/08/2016 - 08:12 | 7016182 Lumberjack
Fri, 01/08/2016 - 10:17 | 7016853 Kayman
Kayman's picture

Lots of scrap in China- some of it is only a few years old.

Fri, 01/08/2016 - 08:06 | 7016184 Catullus
Catullus's picture

Make sure there's a dividend! Because you don't own shit.

Fri, 01/08/2016 - 08:09 | 7016190 StrikerMax
StrikerMax's picture

One thing is for sure ... if Uber is valued at 60Billion Aramco must be at least 60Trillion ...

Fri, 01/08/2016 - 08:15 | 7016221 pods
pods's picture

Yeah but Uber has been around for a long time. 

"Ass, grass, or gas."

Fri, 01/08/2016 - 08:12 | 7016199 overmedicatedun...
overmedicatedundersexed's picture

pumping sea water at a rapid rate to hold pressure in the oil wells- how long before you end up pulling sea water with a film of oil??

an oil well for sale, is an empty hole in the ground with an arab standing next to it..caveat emptor. comes to mind.

Fri, 01/08/2016 - 08:26 | 7016219 Lumberjack
Fri, 01/08/2016 - 08:13 | 7016209 kaboomnomic
kaboomnomic's picture

Eh.. eh.. eh.. GS, CITI, JPM BofAML will use leveraged to buy this company stocks & a killing's derivatives for the clueless..

Eh.. eh.. eh... No. i don't have compassions for idiots..

Fri, 01/08/2016 - 08:17 | 7016226 22winmag
22winmag's picture

Where are the SOCIAL JUSTICE WARRIORS and those who bankroll them on this one?

Fri, 01/08/2016 - 08:29 | 7016265 MoHillbilly
MoHillbilly's picture

Outside investment finds, drills and sets up their oil infrastructure, then they nationalize it. Now, they are going to sell off a part of it to outside investors so that at some point they can nationalize it again?

Charlie Brown and his football think that is crazy

Fri, 01/08/2016 - 08:43 | 7016331 Winston Churchill
Winston Churchill's picture

Must be a lot of unresolved law suits from the last time they nationalized it.

Fri, 01/08/2016 - 08:30 | 7016271 OutaTime43
OutaTime43's picture

Will it have the ticker symbol ISIS?

Fri, 01/08/2016 - 08:37 | 7016295 Catullus
Catullus's picture

I can't upvote this comment enough.

Fri, 01/08/2016 - 08:32 | 7016280 TheFineKid
TheFineKid's picture

When the house of Saud gets done selling, then abandons that shithole part of the world the whole thing gets nationalized by ISIS.

Fri, 01/08/2016 - 08:35 | 7016289 Pumpkin
Pumpkin's picture

Uh, yeah.  Sounds like free energy is about to make its debut.

Fri, 01/08/2016 - 08:37 | 7016294 Son of Captain Nemo
Son of Captain Nemo's picture

What happens when you are denominated in nothing but USD since 1971 and want to get off the "red, white and blue" bus since September 11, 2001... But can't Or else!...

But hey the American money must be good for something like starting wars in Yemen and Syria- (without S400s in them or surrounded by ballistic missile cruisers and strategic bombers) of course!!!

Fri, 01/08/2016 - 08:37 | 7016296 Hannibal
Hannibal's picture

Busted! US Helicopters Aiding ISIS in Iraq
ISIL Assisted by Recent US Heliborne Operations in Huweija

http://www.veteranstoday.com/2016/01/07/busted-us-helicopters-aiding-isi...

Fri, 01/08/2016 - 08:45 | 7016339 Bemused Observer
Bemused Observer's picture

So they decide to go public now? Gee, I wonder why?

They wouldn't be doing this because they actually need money, would they? What, the Saudi princes are running low on cash?

Oh yeah, count me in...that seems like a good investment...put my cash into an aging company that sells a commodity that is dropping in price that happens to be located in the country that is ground zero for the Islamic Jihad movement...yeah, my money is safe there...lol!

I think I'd be better handing my money to Hip-Hop Marty...at least when he goes under I can get a piece of that Wu-Tang album...

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