Peak Oil News and Message Boards

“This is how much the company was worth, officials said, if you multiplied its proven reserves by a factor of US$8, which is the figure used to value oil and gas reserves.” As of today Aramco does not own 1 bbl of oil reserves sitting under Saudi Arabia. It has a production sharing agreement with the Saudi govt. Aramco’s value would be based upon its future NET income from its share of that revenue stream. Aramco is a company…it is not the country of Saudi Arabia. This has been a problem for US public companies wanting to participate with PEMEX developing Mexican reserves. Those companies have not been allowed to book proved reserves as assets because the oil/NG does not become their property until it flows out of the well head. A deal killer for a typical public company.

Similar to most foreign oil/NG concessions: A company, such as Aramco, has the right to drill for and produce the hydrocarbon reserves owned by the host country. The company pays 100% of all development and production costs including its overhead. As the oil/NG is produced and sold the revenue is split between the company and the govt. Currently the Saudi govt receives 85% of the revenue stream with Aramco getting 15%. Out of its 15% Aramco pays for all current and future production and development activity in the concession.

The Saudi govt has said it will reduce its share of the revenue to 50% with Aramco receiving 50% when the IPO is placed. Of course, Aramco’s net income will be reduced by all the operational costs it incurs in the concession. It is that net income from which Aramco MIGHT pay dividends but as of yet no yield has been promised. That will be determined by the board of directors. A board elected by the Saudi govt. Aramco could also retain 100% of its net for future operations. Likewise at any time the Saudi govt can tax Aramco’s share of the revenue stream at any rate it chooses.

Rockman? If I read you correctly you will not be investing a single dollar of you own assets in the public offering of ARMCO.???

No...too old to play such foolish games. LOL.