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Saudi Aramco IPO

Discussions about the economic and financial ramifications of PEAK OIL

Re: Saudi Aramco IPO

Unread postby Outcast_Searcher » Wed 22 Aug 2018, 12:10:40

Saudi Arabia reportedly calls off Aramco IPO and disbands advisers

Saudi Arabia has scrapped its plans to list shares of its state-owned energy giant Aramco on stock exchanges, Reuters reports.

The initial public offering was poised to be the largest ever and was at the center of Crown Prince Mohammad bin Salman's ambitious plan to overhaul the Saudi economy.

The kingdom will no longer seek to publicly list shares on its domestic stock market, the Tadawul, or on foreign exchanges, several sources told Reuters.

https://www.cnbc.com/2018/08/22/saudi-a ... ports.html

So signs KSA is running out of oil, as I'm sure the Cassandras will claim? Or is the KSA hedging its bets both ways. Keeping their oil as global demand grows apace, even while they diversify financial assets away from oil in venues like Tesla? (That's my bet). Or something else entirely?

One thing I think this tends to mean -- less free cash to invest a ton of money in a high risk venture of funding taking Tesla private.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Wed 22 Aug 2018, 13:11:25

Keeping their oil as global demand grows apace, even while they diversify financial assets away from oil in venues like Tesla? (That's my bet). Or something else entirely?


The thing of it is SA was always going to "keep their oil", there was never any intent through an IPO to give anyone else ownership of the oil, all they would have is share ownership in Aramco which has a right to lift oil and sell it. The share holders don't actually get any of the money from the sale of oil and gas, what they get is any uplift value on the share price due to strong cashflow from sales.

Obviously need to see what the formal statement is. Too much of this discussion has been about some "official from the industry" saying such and such with little to no official statements.

the statements in the Reuters report suggest it isn't a "done deal", perhaps something not to be pursued now but maybe at another time.

“The advisors have been put on standby,” a third source, a senior oil industry official said.

“The IPO has not been officially called off, but the likelihood of it not happening at all is greater than it being on.”
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Re: Saudi Aramco IPO

Unread postby Outcast_Searcher » Wed 22 Aug 2018, 13:30:37

rockdoc123 wrote:
Keeping their oil as global demand grows apace, even while they diversify financial assets away from oil in venues like Tesla? (That's my bet). Or something else entirely?


The thing of it is SA was always going to "keep their oil", there was never any intent through an IPO to give anyone else ownership of the oil, all they would have is share ownership in Aramco which has a right to lift oil and sell it. The share holders don't actually get any of the money from the sale of oil and gas, what they get is any uplift value on the share price due to strong cashflow from sales.

My bad on using loose language. I didn't mean to say/imply that the IPO meant they'd be giving up any of their oil per se, but that they'd be giving up some of the INCOME (and potential profits) from that oil.

And yes, I realize that this isn't a done deal, re the cancellation. However, I view Reuters as one of the less obviously biased MSM sources, and they cited multiple sources, so this sounded like a meaningful (though not definitive) development -- or I wouldn't have posted about it.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Saudi Aramco IPO

Unread postby mmasters » Wed 22 Aug 2018, 13:42:20

I think it was all about needing the appropriate funding. When oil was low they were struggling financially so they came up with this as a way to get money in advance. Now that the price of oil is trending higher they're better off and feel they don't need to go down this path.
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Re: Saudi Aramco IPO

Unread postby Outcast_Searcher » Wed 22 Aug 2018, 13:56:39

pstarr wrote:Told you so. I was right . . . you were wrong.


I was right about the Cassandras, as you show.

Who is the "you" you're accusing of being wrong, and what, specifically, are you talking about?
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Saudi Aramco IPO

Unread postby Outcast_Searcher » Wed 22 Aug 2018, 13:59:16

pstarr wrote:All this fancilful conjecture and amateur punditry does not explain SA's flailing and confusion. Not unlike the death throes of a wounded animal. Curious and sad

Naturally, Cassandras view anything short of Nirvana as "death throes". Unfortunately, with a track record of thousands of bad calls spanning many years, and VERY FEW correct calls (despite vague self-congratulating claims with little or no substance), such claims lack ANY meaningful credibility.

But do carry on. We all need hobbies and delusions of success.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Saudi Aramco IPO

Unread postby Outcast_Searcher » Wed 22 Aug 2018, 14:04:31

mmasters wrote:I think it was all about needing the appropriate funding. When oil was low they were struggling financially so they came up with this as a way to get money in advance. Now that the price of oil is trending higher they're better off and feel they don't need to go down this path.

I'll buy that, and that was one of my first thoughts.

OTOH, that's short term thinking, and as a strategy it's likely to have VERY BAD results.

Strategically, the time to do such an IPO would be when prices are looking quite high. They get good value that way, and worst case, if prices go MUCH higher, they can sell another chunk if they wish. (This is one of my favorite strategies in the stock market. It requires patience in the timeframe of decades, though).

However, if whenever times get tough, they look at raising short term cash as a mitigation strategy, they get very poor value.

Given the way most corporations and many governments and, by far, most individuals operate, that might be happening. But again, as a strategy, it would be really stupid.

And as volatile as oil and geopolitical events are, I believe that assuming oil prices can only trend higher than here is quite risky. Currently that looks like a good bet -- but MANY things can change. One would be a meaningful, normal, economic downturn, given how long the US bull market has been this cycle.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Wed 22 Aug 2018, 15:01:07

something I had mentioned before is if ARAMCO buys the investment fund part of SABIC then SA sees cash inflows of $70 MM but the total value of ARAMCO stays fairly static as the money paid (through debt or whatever instrument they choose) is offset by the increased value by bringing in additional downstream interests. If SA then chooses at some point to list ARAMCO through an IPO they then end up with a more money than they would have in the fund versus just doing an IPO, in essence they see two equity events, neither of which is diluted. Also what seemed to make sense to me is if they were not happy with all the hassle of doing an IPO and instead were interested in starting out with a listing on the local exchange it would be easy enough to do an RTO (reverse takeover) of SABIC which is already listed (as far as I am aware). They could then decide if it makes sense for them to dual list on another exchange which is a much faster approach than doing an IPO. But ARAMCO did say they were not interested in an acquisition of the public shares of SABIC so probably rules an RTO out for the time being.

all that being said I think I'll wait to hear what ARAMCO or MBS say. Definitely, something they cannot stay quiet on for very long given all the press is now pointing to the Reuters article. If they have canceled the IPO they are in a good place to reinitiate the process without having to build from scratch given much of the background work regarding financial and reserve audits have been completed meaning they could probably complete it in very short order if they so decided.
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Wed 22 Aug 2018, 20:40:20

So Saudi Arabia is/was "struggling financially"?


Please show us where the Reuters article states that? If you are referencing the price crash down to the $30 range....everyone who produces oil was having a tough time regardless of how much oil they had in the ground.

The whole point of the argument now is that with oil prices hovering around $70/bbl WTI ($75 Brent) SA no longer has too many worries. They have stated they need $80/bbl to meet their budget target which includes no cuts to the various tax breaks, fuel subsidies, food subsidies etc that Saudis currently enjoy. They can easily cut back some without worrying too much about riots at the current prices and given the presumed influx from purchase of SABIC it is pretty hard to imagine they are "struggling financially"
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Wed 22 Aug 2018, 21:18:15

all that being said I think I'll wait to hear what ARAMCO or MBS say.


and lo and behold they did. As might be expected the Reuters report was misleading or as the President of the US would say "fake news"

https://www.cnbc.com/2018/08/23/saudi-aramco-ipo-riyadh-denies-its-scrapping-plans-for-listing.html

Saudi Arabia denies that it's scrapping Aramco IPO

Saudi Arabia denied media reports that the kingdom has scrapped plans to list shares of state-owned energy giant Aramco on stock exchanges.
Khalid al-Falih, the Saudi Minister of Energy, Industry and Mineral Resources and Chairman of Saudi Aramco, said in a statement on Thursday: "The Government remains committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum."
"This timing will depend on multiple factors, including favorable market conditions, and a downstream acquisition which the Company will pursue in the next few months," al-Falih said.


It would be interesting to go to the website of the investment banks that were retained to advise on the IPO. My guess is if they were actually released from service that would be a "material event" as defined by the various exchanges they report to. As a consequence, they would have to release a press statement indicating what had transpired (rules of continuous disclosure). It doesn't matter if they signed a confidentiality agreement with Aramco or the gov't of SA as all of those agreements have a clause that states press releases are allowed and do not require approval if they are required by securities laws. So my view is if you don't see a press release from those banks then they weren't' actually "released". If you do then there should be some useful information included.
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Re: Saudi Aramco IPO

Unread postby StarvingLion » Thu 23 Aug 2018, 20:13:47

Salman's ambitious plan to overhaul the Saudi economy.


Sounds menacing as in dismantling the Saudi Welfare State.

No wonder the IPO didn't happen.

Can KSA maintain oil production and maintain the welfare state?

Obviously not.

They will follow the same pattern as Venezuela. The Welfare State comes first and oil production will drop and then totally collapse.

And the timing of the IPO now states when it will happen by 2021.

In other words, KSA is bankrupt.
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Re: Saudi Aramco IPO

Unread postby StarvingLion » Thu 23 Aug 2018, 20:16:28

rockdoc123 wrote:
So Saudi Arabia is/was "struggling financially"?


Please show us where the Reuters article states that? If you are referencing the price crash down to the $30 range....everyone who produces oil was having a tough time regardless of how much oil they had in the ground.

The whole point of the argument now is that with oil prices hovering around $70/bbl WTI ($75 Brent) SA no longer has too many worries. They have stated they need $80/bbl to meet their budget target which includes no cuts to the various tax breaks, fuel subsidies, food subsidies etc that Saudis currently enjoy. They can easily cut back some without worrying too much about riots at the current prices and given the presumed influx from purchase of SABIC it is pretty hard to imagine they are "struggling financially"


Except for the reality that Ghawar is headed into much higher decline rates by 2020. Thats the purpose of the IPO: to shitcan the Welfare state so they can still do something before its too late.

But what fool in KSA would want the welfare state to ever end? For the useless crap called "renewables"?
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Thu 23 Aug 2018, 21:06:46

Except for the reality that Ghawar is headed into much higher decline rates by 2020.


OK please show us what those "higher decline rates" are. While you are at it maybe you can show us what the "decline" rates for Ghawar are now? I suspect firstly you don't know what "decline" in oil and gas terminology means and secondly you are doing some wildass speculation given there isn't anything published on changing rates of individual fields in SA.
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Thu 23 Aug 2018, 21:12:01

And the timing of the IPO now states when it will happen by 2021.


where does it state that? Not in the article I linked to and you link to nothing.

In other words, KSA is bankrupt.


that is just stupid. Bankrupt infers debt that can't be paid. The Saudis currently have almost zero debt. Their only issue has been subsidizing much of the average Saudi lifestyle with their budget. Given the size of their foreign accounts and the investment fund you pretty much have to be a complete idiot to suggest they are bankrupt. Oh wait a minute...I guess that explains it all. :roll:
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Re: Saudi Aramco IPO

Unread postby ROCKMAN » Fri 24 Aug 2018, 09:19:23

“Khalid al-Falih, the Saudi Minister of Energy, Industry and Mineral Resources and Chairman of Saudi Aramco, said in a statement on Thursday: "The Government remains committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum." Which could be a “true” statement made by any publicly corporation (or privately owned corp) on any stock exchange in the world. Thus a universal truth and as such means nothing. If the Rockman wanted to takes consulting business public he could make the same identical statement.
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Re: Saudi Aramco IPO

Unread postby rockdoc123 » Fri 24 Aug 2018, 09:47:21

Which could be a “true” statement made by any publicly corporation (or privately owned corp) on any stock exchange in the world. Thus a universal truth and as such means nothing.


What it means is that they did not "call off the IPO" as Reuters suggested and the statements they made:

Saudi Arabia has scrapped plans to list shares of its state-owned energy giant Aramco on stock exchanges.


and

The kingdom will no longer seek to publicly list shares on its domestic stock market, the Tadawul, or on foreign exchanges.


are not based on truth. al-Falih was simply addressing the claims made in Reuters and his statements have to be taken in that context

And to be factual your statement:

Which could be a “true” statement made by any publicly corporation (or privately owned corp) on any stock exchange in the world.


is incorrect given a company that is already a public corporation would not "remain committed to an IPO", the fact they are already trading precludes that possibility.

What separates ARAMCO from all the other private companies is they have actually done all the heavy lifting to get to where an IPO can be executed.
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Re: Saudi Aramco IPO

Unread postby StarvingLion » Fri 24 Aug 2018, 20:22:03

Got this book. Can't post quotes because of copyright but states that solar PV is a total failure in Iraq. So it wont work in KSA either. How will KSA ever generate electricity other than oil? America can no longer afford *any* nuclear plants and KSA will never be allowed to operate someone else's nuclear plant builds.

The entire basis of my 'Oil Apocalypse' is based on the massive confusion between decline rate and depletion rate. Plus the impossibility of financing more expensive oil when the cheap oil goes into steep decline. Exxon Mobil not long ago walked away from the Tar Sands as 'Uneconomic crap'.

Total collapse is guaranteed by 2023. The suckers tasked with keeping the lights on in America have already stated that load shedding is guaranteed by 2023. In other words the lights are going off.

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