Shock, Laughter Greet Plan for Saudi Arabia's Record Oil IPO

[RandySF]

When one financial adviser heard about Saudi Arabia’s plans to list a company larger than the economies of most nations, he had to pull over his car because he was laughing so hard.

Saudi Arabian Oil Co., or Aramco, the world’s largest oil producer, said Friday it’s considering an initial public offering. It confirmed an interview with Deputy Crown Prince Mohammad bin Salman published in the Economist Thursday. The news was greeted with incredulity in the financial industry, according to interviews with a half dozen bankers who do business in the Middle East. They asked not to be identified to protect their business interests.

For one thing, Aramco’s inner workings are opaque, making its true value a mystery. Then there’s the timing. The price of crude oil is near its lowest level in more than a decade. Discussions with Aramco about selling assets in the past had been about much smaller parts of the business, five of the people said. An initial public offering of the entire enterprise had only ever been discussed as a joke, one of the people said.

The company could be worth anything from $1 trillion to upwards of $10 trillion, which would make it the most valuable company in the world, according to a note from Jason Tuvey at research firm Capital Economics. The last mega IPO from the oil industry was a decade ago, when Russia’s OAO Rosneft raised more than $10 billion.


http://www.bloomberg.com/news/articles/2016-01-08/shock-laughter-greet-plan-for-saudi-arabian-sale-of-the-century

[sharp_stick]

1. This could be interesting

I'd love to see the balance sheet of that company. You know the payoffs and bribes are immense.

[leveymg]

2. The last time privatization of upstream Saudi oil was floated was 1997

Crude had fallen to $10/bbl. That's also the time that the Saudi Royal Family split into two competing factions. The privatization scheme died in obscurity, but al-Qaeda got a major boost after UBLs Fatwah. Something major is happening again.

[elehhhhna]

4. No way to confirm the volume of their reserves

Hard to value the company.

[RandySF]

3. There's a new order in SA

The new king fired his nephews and put his own immediate family in charge.

[leveymg]

5. Time for a coup.

[Gumboot]

6. I'm wondering if they're running out of oil.

The house of Saud / Bush / cards is looking very shaky these days.

Oil price still tumbling... Jeb polling at approx 5%...

[BlueSpot]

7. Likely the opposite

There is a global glut of oil which you've probably noticed at your local gas station. Oil storage in the U.S. is at record or near record levels - I haven't looked lately. The Saudi's have continued to produce crude at their usual levels in an effort to bankrupt U.S. producers. They're (U.S. producers) fracking which is a whole another thing and I'm not going there for this. The base fact is that the U.S. is producing a lot of oil.

The net effect is that prices for crude continue to erode or at least stay low. At the same time, U.S. producers have become more efficient so they are more able to accept the lower prices than originally expected. I don't know what Saudi oil production costs are but this little price war they've been staging for the past couple of years may have resulted in an operating cash shortage at home. A successful IPO could buy them more time. It will be interesting to see how it plays out.

Of course I can only watch because I sure can't influence it.

If Jeb influences things beyond the basic fundamentals, I don't know. But I don't attribute the price of oil in any way to his poll numbers. It's just supply and demand economics as far as I can tell.

[RandySF]

8. Not bankrupt us so much as

shutting down the more expensive operations in places like the Arctic.

[TransitJohn]

9. Their funding of anti-fracking activism hasn't gained much traction

They expected to shut down American production by now and to be siphoning our dollars away again. Not working out for them.