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.


Saudi Arabia opens new logistics zone in Jeddah

Updated 13 October 2019

Saudi Arabia opens new logistics zone in Jeddah

  • The Al-Khomra zone extends over 2.3m square meters in Jeddah
  • It will support activities around shipping, freight distribution and transport of goods

RIYADH: Saudi Arabia launched on Sunday a new logistics zone open to private investors in the Red Sea port city of Jeddah, as part of a wider industrial initiative to diversify the economy away from oil and create jobs for Saudis.
The Al-Khomra zone — which will support activities around shipping, freight distribution and transport of goods — extends over 2.3 million square meters in Jeddah, home to one of the Kingdom’s largest ports.
As the biggest logistics zone in the country, it hopes to turn Saudi Arabia into a global logistics hub and create 10,000 direct jobs, said Minister of Transport Nabeel Al-Amudi.
It is part of the broader National Industrial Development and Logistics Program (NIDLP), which aims to create 1.6 million jobs and attract investments worth SR 1.6 trillion ($427 billion) over the next decade. Of that, SR 135 billion is earmarked for investment in the logistics sector.
Under its ambitious reform strategy, the Kingdom plans to have the private sector operate much of its transport infrastructure, including airports and sea ports, with the government keeping a role as regulator.
Details of what the government plans to offer investors in Al-Khomra were not disclosed, but the Saudi Ports Authority  (Mawani) said the zone would offer opportunities to investors on a lease basis.
“Investment in the logistics zone in Al-Khomra and other ports will total SR 7 billion,” said Saad Al-Khalb, president of the Saudi Ports Authority.
Al-Khomra joins other logistics zones in the `kingdom — the King Abdullah Economic City north of Jeddah has its own port and offers logistics investments and NEOM, a mega project announced in 2017, has plans for a logistics zone.
Over a decade ago, the Saudi government spent $30 billion to build six economic cities across the Kingdom to diversify the economy, create jobs for young Saudis and attract foreign investment, though many of the projects have failed to achieve expected results.
After decades of spending on development projects, the government has made attracting greater foreign investment a cornerstone of its Vision 2030 plan.