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Saudi Aramco IPO

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Saudi hires firm to assess their oil reserves for Aramco IPO

Unread postby Plantagenet » Thu 26 Jan 2017, 19:37:23

The Saudi government is going to issue shares in Aramco---the Saudi National Oil Company. However, in order to sell shares of their oil company, the Saudi's will have to become more transparent when it comes to their oil reserves, which haven't officially changed in 30 years despite Saudi pumping billions of barrels of oil every year.

Heres the first step---Saudi has hired a Brit accounting company to audit Saudi Oil reservers and issue a public report before they do an IPO of Aramco.

saudi-aramco-hires-firm-to-assess-oil-reserves-before-ipo-

The Saudis plan to bring the ARAMCO IPO to the market and sell shares in 2018.

This could get very interesting.
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby rockdoc123 » Thu 26 Jan 2017, 19:50:10

The auditing firm is not a "Brit accounting company" but rather Gaffney Cline and Associates who have been one of the main players globally in terms of oil and gas reserve auditing. Their two main offices are in London and Houston but they have regional offices all over the place.

This adds considerable legitimacy to the reserve audit. If the Saudis wanted to they could have used a Middle Eastern unknown firm and then listed on one of the ME exchanges.
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby ROCKMAN » Fri 27 Jan 2017, 00:45:09

Doc - They might be righteous auditors. But as you know an audit cannot be more valid then the data provided. Given there's no independent data available then what the KSA provides it should cause some concern, don't you think?
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby Plantagenet » Fri 27 Jan 2017, 01:18:00

Presumably the Saudis will have to provide the same kind of data on their oil reserves that a US company would have to provide in order to do an IPO. The main asset Aramco has is the oil---trying to do an IPO without divulging the amount oil Aramco has would essentially be a fraud.

The news story says the Saudis aren't going to allow their actual reserve numbers to be published, but just the number of years that their oil will last at current rates of production.

That is so dumb. If they publish the number of years the reserves will last, all you have to do is multiply the number of years by current KSA annual production to get their total reserves.

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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby Outcast_Searcher » Fri 27 Jan 2017, 02:37:01

ROCKMAN wrote:Doc - They might be righteous auditors. But as you know an audit cannot be more valid then the data provided. Given there's no independent data available then what the KSA provides it should cause some concern, don't you think?

Wouldn't an independent, credible, auditor be allowed to assess the numbers by having, for example, geologists they hire do soundings (or whatever) to come up with a credible estimate of reserves (based on physics, not claims from the entity being audited).

If all they can do is echo whatever the KSA tells them like sock puppets, then the audits would be pretty worthless, wouldn't they?

IOW, can't they generate their OWN "independent data" as a way to gauge the claims being made, and in fact shoudn't they?

Or am I missing something obvious here?
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby ROCKMAN » Fri 27 Jan 2017, 10:45:39

"the Saudis will have to provide the same kind of data on their oil reserves that a US company would have to provide in order to do an IPO." Y'all don't seem to understand that the major component of reserve analysis is the actual production history of fields. The KSA numbers they give the auditors CAN NOT be verified. IOW the KSA can completely fabricate the numbers to generate the end result they seek. No one knows how much oil and water has been produced from Ghawar Field. And what production history the KSA gives the auditors cannot be vertified. That is completely 180° opposite of reserve audits in the US. Trust me: if the auditors provide a public statement of their audit in the footnotes there will be a goldplated disclaimer not holding them responsible for using incorrect data.

I've mentioned it before: even with all the controls in the US system a talented geologist/engineer can prejudice the auditors in their favor to some degree. Early on the Rockman developed a strong reputation for being so skilled. Never lied or provided false data. But boy, if I could have, the reserve numbers would have been much bigger. LOL. Also had a good reputation for busting audits since I was well versed in the tricks.
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby rockdoc123 » Fri 27 Jan 2017, 11:50:32

Doc - They might be righteous auditors. But as you know an audit cannot be more valid then the data provided. Given there's no independent data available then what the KSA provides it should cause some concern, don't you think?


Having worked with GCA a number of times my guess is they would not agree to conduct the audit unless they were given all the appropriate data. This would mean production information, logs, seismic maps etc. This is pretty easy for Aramco to do given they have it all built into finite element models. The audits that GCA have done I am familiar with involved a full rework of the information, not just checking numbers and signing off. Although Sarbanes Oxley applies only to US companies or companies traded on US stock exchanges (likewise instrument 51-101 in Canada) GCA behaves as if it applies everywhere, hence you can see some pretty heated arguments between the auditor and the operator even when the company is reporting somewhere else. Bottom line is GCA bases it's success on reputation, they aren't going to take on a project that could in anyway jeopardize that. It's not like they are going to charge Aramco anymore than they would any company out there for an audit of similar scope (if they did Saudi Arabia would have gone elsewhere).

My view is anything that comes out of this audit will be pretty reliable remembering that usually the audit will only address P1 and P2 reserves.Also I am not sure what the public disclosure rules are with respect to the Saudi exchange (where I suspect they will be listed). In the US and Canada reserve audit reports are submitted to the regulatory bodies and are public documents. Not sure if this would be the case on the Saudi exchange.

As to
The KSA numbers they give the auditors CAN NOT be verified. IOW the KSA can completely fabricate the numbers to generate the end result they seek. No one knows how much oil and water has been produced from Ghawar Field. And what production history the KSA gives the auditors cannot be vertified.
. Aramco would not have put false information into their full field models, otherwise the outputs would have been useless to them. GCA will have access to the model input data (generally they will review the models and then take the data and run their own). Can't see where the opportunity for the Saudis to fabricate information would come in.

I've mentioned it before: even with all the controls in the US system a talented geologist/engineer can prejudice the auditors in their favor to some degree. Early on the Rockman developed a strong reputation for being so skilled. Never lied or provided false data. But boy, if I could have, the reserve numbers would have been much bigger. LOL. Also had a good reputation for busting audits since I was well versed in the tricks.


this was a common occurrence before Sarbanes Oxley was put in place. After that all of the audit firms became legally responsible for their reports. If they came up with a number that they were coercised into by the operator then the SEC would go after both the company in question as well as the operator. My experience (I had the role of internal reserve auditor for awhile) is that after SOX the battles became more about making sure the auditor wasn't overly pessimistic when it came to Probable reserves. There was always a bit of leeway in Proven Undeveloped as it applies to shale reservoirs (there really isn't any data you could recover that would prove one way or another if a PUD area would produce until you drilled it) but the implementation of rules around how quickly PUD acreage had to be drilled and proven up has helped eliminate that problem. My point is it isn't the wild west in terms of reserve reporting any longer as far as publically traded companies go. Where you do find leeway is when firms like GCA or Ryder Scott etc are asked to perform assessment of resources. There are few rules around that so the numbers can be fairly unreliable.
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby Zarquon » Fri 27 Jan 2017, 16:31:32

A quick google search says that GCA was part of Baker Hughes, Baker Hughes was bought by GE, and GE is currently investing billions in new business opportunities in KSA, in addition to all the business they're doing there already. As for potential conflicts of interest regarding the reserves audit, who knows.
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby ROCKMAN » Fri 27 Jan 2017, 16:45:30

Doc - Same point: "This would mean production information...". No way to confirm those numbers. And yes: the KSA could provide all the logs, seismic data, etc. So give us a guess: how many man-years will it take the auditors to generate the interpretations made over decades? Hell, forget maps and seismic: how long to do just the basic petrophysical analysis?

Or a more basdic question: will the KSA provide the auditors/the world with DOCUMENTED proof of how much oil it produced every month in 2016? Data that has been classified as a state secret.
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby Plantagenet » Fri 27 Jan 2017, 17:07:52

ROCKMAN wrote:...a more basdic question: will the KSA provide the auditors/the world with DOCUMENTED proof of how much oil it produced every month in 2016? Data that has been classified as a state secret.


If they don't they will be committing securities fraud*.

The only reason for anyone to buy shares of the ARAMCO IPO in 2018 is the value of the Saudi oil reserves. These have to be honestly documented and made known to potential investors or the IPO would violate a lot of SEC regulations and laws against fraud.

I suppose its possible that KSA would try to lie about their oil reserves to the accounting firm they've chosen to audit and report on their oil reserves, but its up to accounting firm to do a comprehensive and an honest audit of the KSA oil assets.

---------------------

*definition: Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws.
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby rockdoc123 » Fri 27 Jan 2017, 18:21:40

Doc - Same point: "This would mean production information...". No way to confirm those numbers. And yes: the KSA could provide all the logs, seismic data, etc. So give us a guess: how many man-years will it take the auditors to generate the interpretations made over decades? Hell, forget maps and seismic: how long to do just the basic petrophysical analysis?

Or a more basdic question: will the KSA provide the auditors/the world with DOCUMENTED proof of how much oil it produced every month in 2016? Data that has been classified as a state secret.


as I said above the data access GCA will get is almost certainly direct access to the full field models that Aramco has for all of their fields. The models were state of the art when they were first created and are probably still up there with the best. The models would include all historical production simply because it is needed to not only model decline rates but also gas rate, water rate, pressure and as a result material balance reserve. As far as I am aware Aramco is one of the few companies that was very fastidious about taking bottom hole static pressures and now have continuous monitoring on most of their producing wells (at least according to what I have read from SPE).

With access to the logs, seismic maps it is a pretty easy task to check the net pay maps and then a subsequent easy task to calculate an OOIP number. Matching that against the material balance calculation should hence be a pretty easy task. And matching the porosity and net pay from logs and the Formation Volume Factor from PVT data against the inputs to the finite element models would also be a input verification

For the Saudis to create the amount of false data required to avoid any hint of "cooking the books" just seems out of the realm of reality to me. More importantly having access to their finite element models and the data inputs would pretty much avoid any chance of have the data cooked.
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby kublikhan » Fri 27 Jan 2017, 23:37:23

These firms where hired last year and their audits are already complete. No surprises were reported, their results basically confirmed Saudi Aramco's own figures.

The first independent audit of Saudi Aramco's oil reserves has confirmed the state oil company's own figures, sources familiar with the situation said, ahead of its planned share market listing next year.

Based on a figure of 265 billion barrels, Aramco's fields contain about 15 percent of the world's proven reserves. Any finding that the reserves are significantly above or below that could affect the company's market value in the listing. "The independent audit produced no surprises," a source familiar with the situation said on Friday. "Aramco's reserves have always been reported internally in line with international practice."

Aramco had asked two U.S. oil reserve auditing specialists to review its deposits. These are Gaffney, Cline and Associates, part of Baker Hughes (BHI.N) and Dallas-based DeGolyer and MacNaughton. DeGolyer and MacNaughton completed its audit last year, two of the sources said.

Aramco said its crude oil and condensate reserves were 261.1 billion barrels in its 2015 annual report. The reserves audit produced figures "definitely not below" those published by Aramco, a second source familiar with the matter said, while a third source said the auditing firm's estimate was higher than Aramco's own.
Independent Audit Confirms Saudi Aramco’s Huge Oil Reserves
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby peripato » Sun 29 Jan 2017, 20:11:58

kublikhan wrote:These firms where hired last year and their audits are already complete. No surprises were reported, their results basically confirmed Saudi Aramco's own figures.

The first independent audit of Saudi Aramco's oil reserves has confirmed the state oil company's own figures, sources familiar with the situation said, ahead of its planned share market listing next year.

Based on a figure of 265 billion barrels, Aramco's fields contain about 15 percent of the world's proven reserves. Any finding that the reserves are significantly above or below that could affect the company's market value in the listing. "The independent audit produced no surprises," a source familiar with the situation said on Friday. "Aramco's reserves have always been reported internally in line with international practice."

Aramco had asked two U.S. oil reserve auditing specialists to review its deposits. These are Gaffney, Cline and Associates, part of Baker Hughes (BHI.N) and Dallas-based DeGolyer and MacNaughton. DeGolyer and MacNaughton completed its audit last year, two of the sources said.

Aramco said its crude oil and condensate reserves were 261.1 billion barrels in its 2015 annual report. The reserves audit produced figures "definitely not below" those published by Aramco, a second source familiar with the matter said, while a third source said the auditing firm's estimate was higher than Aramco's own.
Independent Audit Confirms Saudi Aramco’s Huge Oil Reserves

LOL! We're f#cked...
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby pstarr » Sun 29 Jan 2017, 20:50:27

Will investor dupes step up to the plate and buy this fabricated excuse of a lie?

Saudi Arabia has claimed exactly 260 billion barrels reserves since 1984. Just added 1.1 billion barrels for why? What? To instill confidence in the the dupes? Is the investor class completely moronic?
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby Plantagenet » Sun 29 Jan 2017, 21:01:49

The first independent audit of Saudi Aramco's oil reserves has confirmed the state oil company's own figures, sources familiar with the situation said, ahead of its planned share market listing next year.

Based on a figure of 265 billion barrels, Aramco's fields contain about 15 percent of the world's proven reserves. Any finding that the reserves are significantly above or below that could affect the company's market value in the listing. "The independent audit produced no surprises," a source familiar with the situation said on Friday. "Aramco's reserves have always been reported internally in line with international practice."...


Somewhere Matt Simmons is rolling over in his grave

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So Saudi really did have all the oil they said they had all along? Well I'll be darned!
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby pstarr » Sun 29 Jan 2017, 21:06:26

'Independent' says you, PlantedAgent. (not an accident Simmon's extended middle finger is just out of sight)
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby AdamB » Sun 29 Jan 2017, 21:25:39

pstarr wrote:'Independent' says you, PlantedAgent. (not an accident Simmon's extended middle finger is just out of sight)


How dare someone bring an accountant to a reservoir engineering fight!
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby pstarr » Sun 29 Jan 2017, 22:04:02

AdamB wrote:
pstarr wrote:'Independent' says you, PlantedAgent. (not an accident Simmon's extended middle finger is just out of sight)


How dare someone bring an accountant to a reservoir engineering fight!

How's your CV? Still interning at Chesapeake Energy?
/sarc
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby charmcitysking » Mon 30 Jan 2017, 12:06:21

pstarr, this is peak oil - not 'nam. There are rules.
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Re: Saudi hires firm to assess their oil reserves for Aramco

Unread postby Zarquon » Mon 30 Jan 2017, 13:45:37

Your revolution is over, Mr. Starr! Condolences! The bums lost!

OK, enough now.
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