What does another Quarter really mean with Saudi Aramco?


The third quarter, if any, was bad for the Big Oil. Estimates of consensus earnings for international wardens have fallen since July and have fallen sharply over the past two weeks. Brent crude oil accounted for about $ 6.50 barrel less than the previous quarter, while petrochemical margins of benchmark were also lower. Increase slightly more margins, but they are a small fraction of Aramco's profits. Also, even before the explosions at Abqaiq entered the supply, Aramco crude oil production was equal to the same level of sub-10 million a day that it ran from March.

The extra spin here is September attack. There is an argument that Aramco must demonstrate to potential investors that it has come through this trial by missile without damaging its finances. To keep a little out, the company can print a series of fruit that shows that resilience (not just the explosions but the weak commodity background too).

On the other hand, it does not feel that I am very excited about Aramco's ability to absorb the attacks. We know this because oil prices are now lower than they were before the missiles started flying:

Oil prices kicking their heels would not be around $ 60 if there was widespread belief that Aramco was plagued for a long period of time. The paradox here is that the weaker commodity background in the third quarter is a major cause of Aramco's quick action to mitigate nerves by maintaining supplies for customers and working around the day to repair damaged infrastructure.

This will, of course, cost Aramco, so it could be said that investors need evidence that was not too long. But freight oil prices and Aramco ads itself show that the disruption is temporary. In addition, as I wrote about this, favorable changes to Aramco's royalty rates and a five-year preferred institution for minority shareholders mean that these temporary effects would not seriously affect the all-important attitude to dividends anyway.

There may also be potential costs if the IPO is delayed. Momentum for any IPO is avoided if possible, especially when it has certain déjà vu. Plus, the turning of the year is seasonally weaker for oil prices, looking at long-term media:

These are just optics, of course. The price of oil on any given day should not affect the valuation of a company with a reserve value of 60 years. Aramco needle actually moves long term oil prices and risk assessments for the global economy, Arabian restoration efforts, climate change and confrontation in the Middle East.

But optics remained a key feature of this IPO, part of a larger sales pitch for the country as a whole. Going to the $ 2 trillion valuation it is clear that the prince was under four years ago, however, as an obstacle to doing it and for one reason Aramco has set out for domestic beginnings, rather than an international start. The compilation of other fourth numbers is unlikely to change. On the other hand, it provides a little more time to convince some more strategic investors or Saudi investors to enter a level acceptable to the shareholder alone to really count.

To contact the authors of this story: Liam Denning at ldenning1@bloomberg.net

To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or the Bloomberg LP and its owners.

Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. Previously he was editor of the Wall Street Journal's Heard on the Street column and wrote it for the Financial Times Lex column. He was also an investment banker.


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