California National University for Advanced Studies Saudi Aramco Discussion

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Below is an article discussing the potential IPO of Saudi Aramco. Please review the article. In addition, research the topic and find additional articles. Once you have reviewed, answer the following question: What is Aramco worth? In your discussion post, discuss what you think the company is worth, what articles and resources you used, and show the calculations you used.

Saudi Aramco, the giant oil company owned by the Saudi Arabian state, has confirmed that it is considering a share sale.

The move would make Aramco - already the largest oil producer - the world's most valuable listed company.

In an interview in the Economist, deputy crown prince Mohammed bin Salman had said a move was being "reviewed".

The company released a statement on Friday confirming it was looking at a number of options regarding a sale.

"Saudi Aramco confirms that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of an appropriate percentage of the company's shares and/or the listing of a bundle its downstream subsidiaries."

Aramco has crude reserves of about 265bn barrels - more than 15% of global deposits - and with falling oil prices a sale would raise revenues for Saudi.

The government has a deficit nearing $100bn (£68.4bn) due to the collapse in oil prices over the past 18 months.

The deputy crown prince told the Economist he favoured listing Aramco shares on the stock market.

"Personally I'm enthusiastic about this step. I believe it is in the interest of the Saudi market, and it is in the interest of Aramco, and it is for the interest of more transparency, and to counter corruption, if any, that may be circling around Aramco."

He did not say how much of the company could be sold. Analysts have estimated that a full listing of Aramco would be worth more than $1 trillion.

The world's most valuable company currently is Apple, worth about $543bn.

More sales

Aramco produces more than 10 million barrels of oil per day, three times as much as the world's largest listed oil company, ExxonMobil.

Mohammed bin Salman, who as chairman of his country's new Council of Economic and Development Affairs has broad authority over the economy, said the government would sell a range of state assets in healthcare, education and some military industries.

"It will decrease some of the pressure that the government has, and some of them may create good profit," he told the Economist.

Fadel Gheit, analyst for Oppenheimer & Co, said an Aramco flotation "makes a lot of sense".

Even if, say, 20% of Aramco was sold it would fund Saudi Arabia's budget for a year.

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Saudi Arabia is considering an IPO of Aramco, probably the world’s most valuable company The biggest oil of all Middle East and Africa SAUDI ARABIA is thinking about listing shares in Saudi Aramco, the state-owned company that is the world’s biggest oil producer and almost certainly the world’s most valuable company. Muhammad bin Salman, the kingdom’s deputy crown prince and power behind the throne of his father, King Salman, has told The Economist that a decision will be taken in the next few months. “Personally I’m enthusiastic about this step,” he said. “I believe it is in the interest of the Saudi market, and it is in the interest of Aramco.” The potential listing comes as Saudi Arabia grapples with the damage wreaked on its economy by an oil-price collapse to below $35 a barrel, as well as mounting tensions with its arch-rival Iran, following the execution of Saudi cleric Nimr Baqr al-Nimr in early January. It is just one possible step in an ambitious plan to balance the budget and throw open the country’s closed economy. Prince Muhammad made the remarks during his first on-the-record interview, on January 4th, in which he ranged broadly, from the geopolitics of the region, to his efforts to foster radical economic reform in Saudi Arabia. Read the full transcript here. The prince has held two high-level meetings recently on the possibility of floating Saudi Aramco shares. Officials say options under preliminary consideration range from listing some of its petrochemical and other “downstream” firms, to selling shares in the parent company, which includes the core business of producing crude. Officials say Saudi Aramco is worth “trillions of dollars”, but it is one of the world’s most secretive oil companies and reveals no information on revenues and offers only limited information on its hydrocarbon reserves. Prince Muhammad says that a listing would make the company more transparent. Diplomats say investors are already being sounded out. The talk is of first floating part of the company in Riyadh—perhaps 5%. In time that could rise, though the kingdom would continue to exercise control over the company. The upstream part of the business would be most attractive to investors. At 261 billion barrels, Saudi Aramco’s stated hydrocarbon reserves are more than ten times those of ExxonMobil, the largest private oil company. Saudi Aramco is also one of the world’s lowest-cost oil producers, thanks to the ease of pumping oil in Saudi Arabia. Speaking about Iran, Prince Muhammad defended Saudi Arabia’s decision to suspend diplomatic relations on January 3rd after its embassy was set ablaze in Tehran by crowds protesting against Mr Nimr’s execution. The prince denied that there was a risk of outright conflict. “A war between Saudi Arabia and Iran is the beginning of a major catastrophe in the region,” he said. “...For sure, we will not allow any such thing.” However, on January 7th, Iran said that Saudi warplanes had attacked its embassy in Sana’a, Yemen’s capital. Since Prince Muhammad became head of the defence ministry, and the Council for Economic and Development Affairs, just over a year ago, the country’s geopolitical swagger has been coupled with plans for sweeping economic change at home. These plans include gradually eliminating subsidies on electricity, water and housing; seeking private-sector provision in health care and education; introducing a 5% value-added tax on non-essential goods; and studying the complete or partial privatisation of over two dozen agencies, including the national airline and telecoms firm.
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Hi,Find the discussion write up as required, attached herewith.

1

Running Head: ARAMCO

Aramco
Institutional Affiliation
Name
Date

2

ARAMCO

Aramco
Saudi Aramco is officially known as the Saudi Arabian Oil Company. This is the largest
oil producer and is based in Dhahran, Saudi Arabia. This company has approximately 270 billion
barrels in reserves. This is the most profitable company in the world today. This company began
attracting investors' attention in the year 2018 when Saudi Crowned Prince Mohammed bin
Salman announced plans to list 5% of Aramco at a valuation of approximately $2 trillion. This
became the largest initial public offering (Brown et al, 1999).
In the year 2019, Aramco had a net income of $88 billion. This was a decreas...


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