Saudi Aramco Confirms "World's Most Valuable Company" May Go Public
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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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)
Common stock holders to be wiped out after they cash out?
"World's Most Valuable Company"
Uh-huh.
Small caveat: If you happen to be caught selling or shorting this stock, you might be beheaded.
pods
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.
"Prove we DON'T have the reserves... I _dare_ you."
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.
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
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. . .
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.
Everyone understands what happens once it's listed..."aaaaaand it's gone."
Would you buy a secondhand oil well from the Saudis?
Might be a bit less creepy than buying a secondhand camel that gets nervous when you walk behind it?
pods
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."
Well, part one of the wealth extraction would be a bubble, so it might be fun for the ride up.
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.
And without Uncle Sam protecting the Beheaders, the Sauds are no more.
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Just remember to close those Angel Eyes quickly, unless you are doing the JOMG routine.
I like a company that will say "Profits need to be up or heads will roll"
Sounds like a solid BUY!
Sauds are cashing out ahead of the war with Iran.
Seems like a good opportunity to get shares of empty oil wells.
Desperate. They need another king.
As RBS notes, "Aramco has the largest known oil reserves at around 261bn barrels...
Color me skepical.
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.
Correction-"Saudi Arabia claims to have the largest known oil reserves" Aramco owns nothing.
Just as the casino is about to shut the doors they offer the biggest jackpot ever.
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.
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 . . .
another option is for Trump to go take it
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.
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
Pawn Stars....
What is the price of scrap again?
Lots of scrap in China- some of it is only a few years old.
Make sure there's a dividend! Because you don't own shit.
One thing is for sure ... if Uber is valued at 60Billion Aramco must be at least 60Trillion ...
Yeah but Uber has been around for a long time.
"Ass, grass, or gas."
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.
Salting the well....
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..
Where are the SOCIAL JUSTICE WARRIORS and those who bankroll them on this one?
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
Must be a lot of unresolved law suits from the last time they nationalized it.
Will it have the ticker symbol ISIS?
I can't upvote this comment enough.
When the house of Saud gets done selling, then abandons that shithole part of the world the whole thing gets nationalized by ISIS.
Uh, yeah. Sounds like free energy is about to make its debut.
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!!!
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...
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...