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Saudi Aramco IPO

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Re: Saudi Aramco IPO

Unread postby onlooker » Mon 30 Jul 2018, 18:06:16

In my humble opinion they have been LYING about amount of reserves. period. What else were they going to do Pstarr
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Mon 30 Jul 2018, 18:09:06

the most important reason the Saudis are reconsidering the IPO is that the government simply does not want to subject the company to an independent audit that would for the first time since 1980 determine whether the country has been telling the truth about its oil reserves.


and yet they went through 2 years of work including audits (try to keep that stuff secret) on reserves and finances and now it seems if they want to do a bond offering they have to disclose everything anyway. So, sorry, no credibility to this analysis either.

There will be resistance among the Kingdom's hoi polloi to allowing money to leave the country. If their opinion counts for anything?


explain exactly how "money is leaving the country"

In my humble opinion they have been LYING about amount of reserves. period. What else were they going to do Pstarr


and your opinion is worth more than say Gaffney Cline and Assoc ane Degolyer and Macnaughton?? :roll:
Give me a break. You could get away with a comment like that a few years ago, now that audits have been done it is no longer a valid talking point.
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Re: Saudi Aramco IPO

Unread postby onlooker » Mon 30 Jul 2018, 18:46:44

And how exactly can you physically audit these reserves? Does the “auditor” check the physical state of every Saudi field? Not a chance. Seems its all just confirmation of paperwork and the math. They are just taking their word for it. And kind of suspicious that at the time of auditing these companies had service contracts with Aramco
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Mon 30 Jul 2018, 20:23:13

And how exactly can you physically audit these reserves? Does the “auditor” check the physical state of every Saudi field? Not a chance. Seems its all just confirmation of paperwork and the math. They are just taking their word for it. And kind of suspicious that at the time of auditing these companies had service contracts with Aramco


Aramco has collated all of the data from their fields including production, injection, water cut, drilling history, fracking history and results etc, etc into what they call the Smart Field model. They have a static model created from the extensive well and seismic information and a dynamic model which incorporates all of the production data etc etc and is continously updated electronically. Everything in SA is setup with SCADA. ARAMCO was a pioneer in full field modeling and arguably are well advanced in comparison to even companies like Exxon and BP. Much of this is reported in SPE papers over the years.

GCA and D&M would have had access to all of this data. It is quite simple from a static model and all of the integrated well data (using krigging to interpolate between wells) to arrive at OIP and GIP. The dynamic model allows for a probabilistic assessment of ultimate recovery based on production history, fluid rheology and chemistry as well as a host of laboratory work.

Since Sarbanes Oxley reserve audit firms have been held to particular scrutiny by the various regulatory bodies on exchanges. By signing off on a reserve audit they become legally responsible for that estimate, not something they take lightly. I have been involved in many audits by both of these companies and they seldom will take any direction from you unless there is something you can demonstrate they have overlooked. It used to be a lot different, and some of the smaller audit firms (one man shops) are almost certainly more likely to play fast and loose with their audits but the big boys do not play around, this is their livelihood and they depend on their reputation.

Do I really need to explain that? :? :shock: 8O


apparently, because an IPO does not result in "money leaving the country". The money from the sale of stock in ARAMCO would reside in the PIF in SA. The cashflow from ARAMCO operations remains in SA. Shares that trade on an international exchange do not represent money that has left the country.
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Re: Saudi Aramco IPO

Unread postby onlooker » Tue 31 Jul 2018, 07:14:29

The Aramco IPO may now be history, put on indefinite hold several weeks ago, but Saudi Arabia's funding needs have never been greater. As a result, 32-year-old Crown Prince Mohammed bin Salman, aka MbS, has come up with a "novel" scheme to raise tens of billions for the government. According to the WSJ, the de facto Saudi leader is forcing urging Aramco, also known as the Saudi Arabian Oil Company, to raise debt to buy a controlling stake in a petrochemical company from the country’s sovereign-wealth fund. The money would then go to the government - whose latest fund-raising strategy, we remind readers, was to round up the country's oligarchs and hold them in a "hotel" until they paid up - to be spent as MbS sees fit. .

Should the deal go through, and there are many reasons why it won't, it would give the Public Investment Fund between $50 billion and $70 billion for all or part of its stake in Saudi Basic Industries, or Sabic. Controlled by the state, Sabic is also the country’s largest publicly listed company, with a market cap of about $100 billion.
Simplifying the money flow: the cash goes from international yield chasers, to a consortium of banks, to Aramco, to Sabic, to the Saudi government


https://oilprice.com/Energy/Energy-Gene ... llars.html
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Tue 31 Jul 2018, 11:31:34

Note: the orange boxes represent intended additions by field so for instance MNIF – Manifa (Arab Heavy, API 29). Not coincidentally Manifa was the last great field produced by Saudi Arabia. Not only is it a somewhat heavy grade (with less gasoline parts) but the oil is highly sulfurous with heavy metals and expensive to process. The bottom of the barrel as it were


As I have stated numerous times all along ARAMCO stated they would increase spare capacity to 12.5 MMb/d which meant that if required to do so they could increase production to that level if needed. IF NEEDED. By all accounts (SPE papers, foreign contractors who were employed etc) the mega projects were all successful with the exception of Manifa which was put on hold. Because Shaybah ended up producing at higher rates than originally anticipated they still met the 12.5 MMb/d spare capacity target.

As I said over a decade ago on this site when the world demands more Saudi crude and they can't deliver it then you can crow about there being no spare capacity, until then such a claim has zero credibility. Each time the Saudis needed to bring more crude on stream since roll out of the megaprojects they have done so....Libya twice now and Iran.

It is not in their best interests to increase production to levels which will drive prices down. They want higher prices but also realize they need to manage that as it leads to more activity in the US shales and potential loss of market share.

Once again the definition of spare capacity is oil which can be brought on stream in 90 days or less with minimal additional investment. The megaprojects sought to build this through massive investments increasing water and gas handling capacity, MRC wells, separation and gathering systems.

As to your inference that this is all heavy sour crude, nothing could be further from the truth. Manifa is indeed heavy and slightly sour but the rest is not. Indeed Shaybah is superlight and sweet. And the Saudis commissioned two separate refineries (Yanbu and Jubail)to deal specifically with their heavy crude from Manifa. The other sour crude production from Saudi at Safaniyah has been sold for decades into Europe, there is high demand for it.
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Tue 31 Jul 2018, 12:24:04

Yet SA had previously stated such an intent, a goal has been published.


they did not say that. They said they would increase spare capacity i.e. so they "could" produce up to 12.5 MMb/d not that they would.

And the world of oil consumers (as represented by various government agencies) had assumed such an outcome.


complete BS. Look at the projections back over the last decade by IEA, BP, WoodMac etc. They all assumed Saudi would produce along with OPEC complied quotas, which they have unless they were required to fill the gap dropped by another member. Never once has Saudi had an OPEC quota of 12.5 MMbpd....to produce at that rate without a significant reason would tear OPEC apart and any sense of market stabilization would go out the window.

Not OPEC. OPEC doesn't exist anymore.


well maybe you should tell all the members that they wasted a lot of money on plane tickets and hotels in Vienna last month. I guess according to you they could have avoided the press release they made following that meeting:

Reaffirming the continued commitment of the participating producing countries in the ‘Declaration of Cooperation’ (DOC) to a stable market, the mutual interest of producing nations, the efficient, economic, and secure supply to consumers, and a fair return on invested capital, and noting the overall improvement in market conditions and sentiment, and the return of confidence and investment to the oil industry.

Recalling the 171st OPEC Conference Resolution reached on 30 November 2016 for a production adjustment of 1.2 million barrels a day (mb/d) for OPEC Member Countries, with the understanding reached with key non-OPEC participating countries, including The Russian Federation, to contribute a production adjustment of 0.6 mb/d.

Recalling the DOC reached on 10 December 2016; and noting that countries participating in the DOC have exceeded the required level of conformity that had reached 147% in May 2018.

Accordingly, the 4th OPEC and non-OPEC Ministerial Meeting hereby decided that countries will strive to adhere to the overall conformity level, voluntarily adjusted to 100%, as of 1 July 2018 for the remaining duration of the DOC and for the JMMC to monitor the overall conformity level and report back to the OPEC and non-OPEC Ministerial Meeting.


I guess you lived so long in Shortonoils bizarro world that you are having a tough time re-entering reality. :roll:
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Tue 31 Jul 2018, 13:32:13

But at what price does capacity become reality? No mention in EIA or any definition. SA was unable to bring 12 mbpd online as promised innumerable times during the six years crude was priced $100/barrel.


Once and for all.....SA is a member of OPEC, arguably the most important member. Their OPEC quota has never ever been near 12 MMbpd. They have produced at quota and then produced over quota when it was necessary to make up for losses from other OPEC members (Libya, Iran).

Please find a quote from the minister of petroleum, King or anyone else at a senior level in KSA who said they were raising production because they were worried about $100/bbl oil. Throughout that period supply and demand were not imbalanced to any great extent according to OPEC analysis, indeed their claim was much of the higher prices were speculation. And contrary to your ridiculous claims elsewhere the world did not fall apart after 4 years of $100/bbl oil. Demand did not collapse, economies did not collapse and no the recession had zero to do with high oil prices as literally, scores of analysis have demonstrated.

Done playing for now


Thank Christ.
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Re: Saudi Aramco IPO

Unread postby charmcitysking » Fri 03 Aug 2018, 06:53:57

rockdoc

I was hoping you might voice your opinion on the anomaly of SA's stated reserve count? How is it that they've maintained a reserve of 285 billion bbls over the past 3 1/2 decades despite pumping over 100 billion barrels during that timeframe?

Also - You mentioned that the firms whom conducted the audits on the reserves found that they were in line with the figures that Aramco put out. Are those firms legally bound to confirm that one way or another at this point in time, considering the delays in the IPO? What I guess I'm asking is, could they be held liable for misrepresenting Saudi reserves at this point, considering the actualy listing of Aramco is still way off? Not sure if that question is entirely cogent - if not, my apologies and i'll try and rephrase it.
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Fri 03 Aug 2018, 10:12:32

I was hoping you might voice your opinion on the anomaly of SA's stated reserve count? How is it that they've maintained a reserve of 285 billion bbls over the past 3 1/2 decades despite pumping over 100 billion barrels during that timeframe?


It's called movement of reserves through the categories to Proven which is generally what is reported. You see the same thing with US companies who yearly show 100% to 150% reserve replacement (the E&Y study has demonstrated this over the past 5 years). They haven't found more (necessarily) with the drill bit but have been successful in moving Probable and Possible reserves and in some cases Contingent Resources to the Proven category which gets reported.

Also - You mentioned that the firms whom conducted the audits on the reserves found that they were in line with the figures that Aramco put out. Are those firms legally bound to confirm that one way or another at this point in time, considering the delays in the IPO? What I guess I'm asking is, could they be held liable for misrepresenting Saudi reserves at this point, considering the actualy listing of Aramco is still way off? Not sure if that question is entirely cogent - if not, my apologies and i'll try and rephrase it.


The moment they sign the reserve report they are legally responsible for it's accuracy. The reserve report(s) aren't in the general public at this point but would be when the prospectus is issued. Since no one has access to them there isn't much risk of anyone pointing to inaccuracy at this point but it doesn't matter. The auditors submit the signed document to the company and the company submits that document to the regulators as required. The auditors do not know when or what will transpire with the audit they have conducted so are legally responsible from the minute they complete it irrespective of what the company decides to do with it.
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Sun 05 Aug 2018, 22:36:19

Saudi Arabia just expelled the Canadian ambassador and said it was freezing trade with Canada to protest Canadian meddling in KSA internal legal and religious affairs.

saudi-arabia-freezes-trade-with-canada-for-urging-activists-release

I guess that means the Toronto Stock Exchange is out of the running as the site for the long delayed ARAMCO IPO----not that there is any sign of the IPO being listed anyway.

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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Mon 06 Aug 2018, 10:11:28

I guess that means the Toronto Stock Exchange is out of the running as the site for the long delayed ARAMCO IPO----not that there is any sign of the IPO being listed anyway.


the Saudis already officially excluded the TSX from being a potential primary listing candidate last year. In the running still is the NYSE, London and Hong Kong. TSX arguably has lost a lot of liquidity over the past few years which makes it a bad choice for a primary listing of this size.
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Mon 06 Aug 2018, 10:50:22

In the running still is the NYSE, London and Hong Kong.


You must have missed all the talk about ARAMCO doing the IPO at home in the KSA bourse as a way to avoid the disclosures of concerning their financial practices and oil reserves that would be required if they did it in a western marketplace.

And recent reports in the WSJ and elsewhere suggest ARAMCO may not do the IPO at all.

Time will tell.

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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Mon 06 Aug 2018, 11:29:18

You must have missed all the talk about ARAMCO doing the IPO at home in the KSA bourse as a way to avoid the disclosures of concerning their financial practices and oil reserves that would be required if they did it in a western marketplace.


You mean all of the "talk" that completely ignores the fact ARAMCO has already done the reserve and financial audits? If they were worried about disclosure in those areas why would they have ever started down the path? The simple answer is they wouldn't have as trying to keep that information secret would be nearly impossible. And as was stated above they are now out looking to issue bonds to help pay for the acquisition of shares in SABAC...doing so requires disclosure both with regards to finances and reserves.

And recent reports in the WSJ and elsewhere suggest ARAMCO may not do the IPO at all.


right...undisclosed sources. Tell you what why don't you put a plug in this repetitive nonsense until such time as someone from the ministry or ARAMCO makes a public statement that the IPO has been cancelled?
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Mon 06 Aug 2018, 11:45:21

ARAMCO has already done the reserve and financial audits? If they were worried about disclosure in those areas why would they have ever started down the path?


Ignorance? Stupidity? Arrogance? Or maybe they just changed their minds. Who knows?

But the fact remains that the reserve and financial audits have not been released for public examination, as would be required if ARAMCO was to actually move forward with the IPO in a western bourse.

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Re: Saudi Aramco IPO

Unread postby ROCKMAN » Mon 06 Aug 2018, 12:36:55

P – It’s good to understand how IPO’s are typically done. The company has to negotiate a price acceptable to both itself and the UNDERWRITERS of the IPO. The underwriters buy the shares being offered in the IPO. Not my area but I don’t recall any IPO being offered initially at the RETAIL LEVEL. IOW where you and I could buy the stock. It’s the underwriters that offer their stock for sale on the date of the IPO offering. There have been a few IPO where the underwriters lost money…at least on paper. The underwriters are typically huge investors: 100’s of $millions if not $billions. If the underwriters won’t commit to a company’s acceptable price then no IPO.

But this is all pure speculation on my part.
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Mon 06 Aug 2018, 12:45:43

Ignorance? Stupidity? Arrogance? Or maybe they just changed their minds. Who knows?


you have to be pretty naive to believe that. Right out of the gate they hired two of the largest investment banks in the world to help them with the process along with the two largest reserve auditors. Even if for some reason ARAMCO management wasn't aware of disclosure requirements (which is really stupid to believe given they have a lot of money trading in international exchanges worldwide) they would have been instructed right at the start of the process as to what would happen. If they were worried about disclosure they would have stopped the process early on and would not be out there now trying to sell a bond in international markets.

But the fact remains that the reserve and financial audits have not been released for public examination, as would be required if ARAMCO was to actually move forward with the IPO in a western bourse.


The minute they submit the prospectus to wherever they end up listing all of the audits become public domain. This would happen on Hong Kong as well as New York or London. The prospectus is only submitted a few weeks prior to listing, it is essentially one of the final steps.

Once again please put a sock in it until such time as there is an official statement from ARAMCO or the Saudi Gov't.
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Mon 06 Aug 2018, 13:03:51

If they were worried about disclosure they would have stopped the process early on


Earth to crocdoc. Perhaps that is why the IPO process has been stalled since early on in 2016.....

and would not be out there now trying to sell a bond in international markets.


Wrong again. ARAMCO selling bonds has nothing to do with the IPO. ARAMCO is selling the bonds to finance their takeover of SABIC which is going ahead this year.

Try to keep up.

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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Mon 06 Aug 2018, 13:25:32

There have been a few IPO where the underwriters lost money…at least on paper. The underwriters are typically huge investors: 100’s of $millions if not $billions. If the underwriters won’t commit to a company’s acceptable price then no IPO.


one of the investment banks that were originally retained by ARAMCO as advisors (J.P. Morgan, Morgan Stanley, HSBC) will almost certainly end up being the book-runner and the other two along with possibly Goldman Sachs and Citibank would form the syndicate. Each of those investment banks would have a piece of the IPO to sell. It seems like it is the investment banks buying the pre-released shares but in fact they offer up their part of the IPO to select clients. The price is decided once the IPO is accepted by the exchange. In my own experience, this is done by taking into account the valuation arrived at through the reserve audit process along with discussions around how attractive the stock might be, what the competition is etc. The book-runner of the syndicate has to take into account what the gross spread is (ie difference between the price listed and the price the syndicate pays per share, generally around 7%). That amount is shared amongst the syndicate. They also want to list at a price that will not create a lot of necessary early stabilization (i.e. the book-runner is responsible for buying shares below or above list price in the market for the first period it is trading in order to try to stabilize the price which is why you can see wild swings in price the first week or so of trading). The discussion will insue around whether it is necessary to low-ball the price in order to get several times oversubscribed which usually has a positive impact on share price as trading begins. Interestingly enough the banks actually won't make a pile of money by being part of the IPO syndicate for ARAMCO. They want to be involved in order to assure additional M&A business with ARAMCO going forward. Personally, I can't see that ARAMCO will have any problem being oversubscribed with an IPO unless their price demand or amount of outstanding shares is completely ridiculous. There are a lot of banks climbing all over each other to get involved so I suspect ARAMCO is in a pretty strong negotiating position.

Earth to crocdoc. Perhaps that is why the IPO process has been stalled since early on in 2016.....


It wasn't stalled early on. At each and every opportunity since they started down this road ARAMCO had stated they were on target with their original goal of an end 2018 listing. Throughout the period you claim they were stalled they were busy completing all the work necessary to put an IPO in place. This is not meagre given the size and complexity of the deal. The first time they came out and hinted it would be delayed until 2019 was in January of this year when Khalid al-Falih stated
We hope that 2018 will be the right time, but ultimately we have to make sure the market is ready,


Wrong again. ARAMCO selling bonds has nothing to do with the IPO. ARAMCO is selling the bonds to finance their takeover of SABIC which is going ahead this year.


I see English really is a second language for you. What I said was that by selling bonds on the international market they are subject to the same level of disclosure scrutiny with regards to finances and reserves (given this is the main backstopping value of the corporation) as they would be when listed.
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Re: Saudi Aramco IPO

Unread postby Plantagenet » Mon 06 Aug 2018, 14:12:42

At each and every opportunity since they started down this road ARAMCO had stated they were on target with their original goal of an end 2018 listing.


That isn't true. There was no mention of a 2018 target date for the IPO in their initial announcements. Even the statement by the CEO of ARAMCO in early 2018 doesn't set a late 2018 IPO date.

The CEO of ARAMCO also said he doesn't plan on doing the IPO in NY, London or Hong Kong as you falsely claim. The CEO said they will list in KSA. Of course, disclosure requirements will be minimal if the IPO comes out only in a KSA bourse.

https://www.cnbc.com/2018/05/02/aramco-ipo-changes-the-dynamics-of-saudi-arabia-economy.html

And finally, the news story predates the Crown Prince influencing ARAMCO to sell bonds and buy the states shares of SABIC for ca. 50-60 billion, thereby providing the money the Crown Prince wants for infrastructure projects and obviating any need for ARAMCO to do an IPO to raise money for KSA infrastructure projects---.

Thus it makes sense when recent news reports in the WSJ and elsewhere (see my links and cogent discussion up the thread) say the IPO is stalled out and may not happen at all now.

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