The Latest on Saudi Aramco

Alan Penny

25 November 2019

2 min read

  • Saudi Aramco executives meet officials around the world
  • Struggles to find an anchor investor for IPO
  • Repricing almost inevitable
  • Oil markets continue overall consolidation

Saudi Aramco executives recently met several officials around the world to discuss a potential investment in the oil giant, that could raise as much as $25 billion in capital.

Aramco has struggled to find a major anchor investor for its IPO, something that in theory could be one of the world’s biggest ever. According to sources, Singapore’s GIC, and the Kuwait Investment Authority were amongst the sovereign investors that were approached. Aramco was also offering investment roadshows, which were kicked off in Abu Dhabi. Aramco also met with investors this weekend in Dubai.

Massive disappointment in the works

One thing that should be kept in mind is the high involvement of the Saudi Arabian government. The Saudi Arabian government has a social contract with people much like China does, in the sense that they are allowed to keep power as long as the populace has a relatively decent standard of living.

The Saudi Arabian government is currently struggling with cash flow, as oil markets have not provided the windfall of profits as it had in the past. Saudi Arabia had promised its citizens much more than it can deliver in this scenario.

Adding more pressure on the Saudi Aramco sale is that it could inject much needed cash into the Saudi Arabian coppers. At one point, it was anticipated to be able to raise as much is $1 trillion in the IPO, but those dreams have since been given up on.

One of the biggest problems Saudi Arabia faces now is the fact that the United States is producing almost 13 million barrels a day, while Canada continues to be a major producer as well. This keeps pricing out of the hands of OPEC, at least for a large portion of crude oil.

Saudi Aramco has increased the aggression in which it is trying to market the company. Just 15 years ago, this could have been released as a press statement and players would have jumped in with both feet. Saudi Aramco is a microcosm of what we are seeing around the world, as the energy markets are changing in a permanent manner.

Saudi Aramco’s prospects can not only greatly affect the company, it may affect stability in Saudi Arabia itself 

Despite the increasing marketing strategies, the momentum for the sale has all but dropped off the face of the earth. In fact, Saudi Aramco has canceled marketing roadshows for its listing outside of the Gulf area due to little interest from foreign investors on an institutional level. Pay attention to the Saudi Aramco path going forward, because Saudi Aramco’s prospects can not only  greatly affect the company, it may affect stability in Saudi Arabia itself.

Written By
Alan Penny

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