Saudi Aramco ‘ready’ for IPO, says oil giant’s finance boss

Aramco revealed their financial statement for the first half of 2019 (File/AFP)
Updated 14 August 2019

Saudi Aramco ‘ready’ for IPO, says oil giant’s finance boss

  • Aramco said their income for the first-half of 2019 was $46.9 billion
  • ● Net income of $46.9bn for first half of 2019 ● $70bn merger with Sabic on track for completion

DUBAI: Saudi Aramco said it was ready for an IPO, as it opened itself up to scrutiny through a conference call with financial analysts from some of the world’s biggest institutions.

Khalid Al-Dabbagh, chief financial officer of the state oil company, fielded questions from experts in energy, finance and investment. His message to international investors was that Aramco is in good financial health, pursuing its long-term strategic objectives, and is ready to come to stock markets through an initial public offering (IPO) whenever the Kingdom’s government, the owner of Aramco, decides the time is right.
Al-Dabbagh, who was speaking from the group’s Dammam headquarters, said: “We have delivered strong and unmatched financial results despite the lower oil price and volatile market conditions. This is a testament to our resilience.”
Aramco earlier unveiled a net income of $46.9 billion for the first half of 2019 — more than the profits of all independent oil majors combined — on revenues of $146.9 billion. Both figures were down from the same period in 2018, mainly because of the lower oil price and higher expenditure.
Post-results conference calls are common for big companies after details of financial performance have been sent to the appropriate authority — in this case the London Stock Exchange (LSE), where Aramco bonds are listed.

The company is ready for the IPO, but the timing is a shareholder issue, and is dependent on their perception of market conditions.

Khalid Al-Dabbagh, Chief financial officer of Saudi Aramco

But it was the first time Aramco has invited interrogation from investment analysts, and a sign it is gearing up for further engagement in the global financial markets, including what will almost certainly be the biggest share offer in history.
In the 30-minute webcast, Al-Dabbagh took calls from nine analysts from global investment institutions. Most of the questions sought clarification or further details of what had already been announced on the LSE, but he also hammered home some of the big messages Aramco was trying to get across. Al-Dabbagh underlined the commitment to expansion in the downstream business, Aramco’s environmental priorities, and its determination to ensure supply and delivery of oil supplies to the world. He also reassured analysts that the $70 billion merger with SABIC, the Kingdom’s industrial giant, was on track for completion “very soon.”
Irene Himona, managing director for oil and gas at French bank Societe Generale, asked about future dividend policy, which could be a crucial factor in deciding the attractiveness of shares in an IPO.
Al-Dabbagh said that dividends would be decided according to sustainability, affordability and benchmarking with its peer group in the oil industry which already pay dividends.
Richard Segal, senior analyst at Canadian financial giant Manulife Asset Management, asked for an update on the IPO. “The company is ready for the IPO, but the timing is a shareholder issue, and is dependent on their perception of market conditions,” Al-Dabbagh answered.

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$ 146.9bn - revenue for the first half of 2019 was announced by Saudi Aramco on Monday.

There were also questions about Aramco’s financial position and the specifics of its production processes. Martijn Rats, global oil strategist at Morgan Stanley, asked why Aramco’s cash flow and net income were substantially higher than its oil industry peers, and why return on capital was “in a different ball park.”
Al-Dabbagh said that Aramco had a long-term strategy focused on sustainable value growth, underpinned by operational excellence and innovative technology, with some of the most productive reservoirs on earth that were wholly owned by Aramco, as well as lower production costs than its peers.
Christyan Malek, head of regional oil and gas research at JP Morgan, said that Aramco’s carbon densities — the measure of pollutant in its crude output — were among the best in the energy business, and it also had a relatively low flaring rate.  “We were not surprised by the audit of our carbon intensity. It’s a result of decades of diligent environmental protection methods,” Al-Dabbagh replied.


Oil recoups losses as OPEC, US Fed see robust economy

Updated 14 November 2019

Oil recoups losses as OPEC, US Fed see robust economy

  • US-China trade deal will help remove ‘dark cloud’ over oil, says Barkindo

LONDON: Oil prices reversed early losses on Wednesday after the Organization of the Petroleum Exporting Countries (OPEC) said it saw no signs of global recession and rival US shale oil production could grow by much less than expected in 2020.

Also supporting prices were comments by US Federal Reserve Chair Jerome Powell, who said the US economy would see a “sustained expansion” with the full impact of recent interest rate cuts still to be felt.

Brent crude futures stood roughly flat at around $62 per barrel by 1450 GMT, having fallen by over 1 percent earlier in the day. US West Texas Intermediate crude was at $56 per barrel, up 20 cents or 0.4 percent.

“The baseline outlook remains favorable,” Powell said.

OPEC Secretary-General Mohammad Barkindo said global economic fundamentals remained strong and that he was still confident that the US and China would reach a trade deal.

“It will almost remove that dark cloud that had engulfed the global economy,” Barkindo said, adding it was too early to discuss the output policy of OPEC’s December meeting.

HIGHLIGHT

  • US oil production likely to grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations.
  • The prospects for ‘US crude exports had turned bleak after shipping rates jumped last month.’

He also said some US companies were now saying US oil production would grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations — reducing the risk of an oil glut next year.

US President Donald Trump said on Tuesday Washington and Beijing were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony.

“The expectations of an inventory build in the US and uncertainty over the OPEC+ strategy on output cuts and US/China trade deal are weighing on oil prices,” said analysts at ING, including the head of commodity strategy Warren Patterson.

In the US, crude oil inventories were forecast to have risen for a third straight week last week, while refined products inventories likely declined, a preliminary Reuters poll showed on Tuesday.

ANZ analysts said the prospects for US crude exports had turned bleak after shipping rates jumped last month.