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.


South Korea seeks arrest of Samsung heir in succession probe

Updated 39 min 16 sec ago

South Korea seeks arrest of Samsung heir in succession probe

  • Jay Y. Lee faces a return to jail just a little over two years after being released from detention

SEOUL: South Korean prosecutors have requested an arrest warrant against Samsung Group heir Jay Y. Lee, they said on Thursday, in the investigation of a controversial 2015 merger and alleged accounting fraud in a suspected bid to aid his succession plans.
The move spells fresh trouble for Lee, who, if arrested, faces a return to jail just a little over two years after being released from detention in February 2018.
Lee already faces trial on a charge of bribery aimed at winning support to succeed ailing group patriarch Lee Kun-hee, and which involved former President Park Geun-hye, and spent a year in detention until the bribery case was suspended in 2018.
Prosecutors said they sought Lee’s arrest on suspicions of stock price manipulation and audit rule violations, among other offenses.
In a statement, Lee’s lawyers expressed “deep regret” at the prosecution’s decision to seek his arrest, adding that he had fully cooperated with the investigation while Samsung was going through management crises.
Prosecutors have been investigating suspected accounting fraud at drug company Samsung Biologics after the Korean financial watchdog complained the firm’s value had been inflated by $3.7 billion in 2015.
Prosecutors contend the violation helped boost the value of its major owner, Cheil Industries, which counted Lee as its top shareholder, and merged with Samsung C&T, a de facto holding firm, Yonhap news agency said.
Samsung requested an outside review of the investigation to weigh the validity of the indictment and the Seoul Central District Prosecutors’ Office is following the necessary procedures, it said in a statement.
Last month, prosecutors questioned Lee, 51, over the latest investigation. He also apologized for a series of controversies around his succession planning.
Lee’s year in detention followed separate charges that he bribed Park to win government support for the 2015 merger which helped tighten his control of South Korea’s top conglomerate.