Saudi Arabia announces IPO of world's most profitable company - CNN

Following approval from the country's regulators, Saudi Aramco on Sunday formally announced its intention to float shares on the Tadawul exchange in Riyadh. Aramco executives will now embark on an international roadshow to court investors, and a prospectus outlining the company's financial details is expected later this month.

"(The IPO) will increase our international visibility as the leading company in the world," CEO Amin Nasser said at a press conference. He declined to comment on the company's valuation, which executives said would be determined following consultation with potential investors.

Aramco has vast oil reserves and massive daily output. It holds a monopoly in Saudi Arabia, the world's largest exporter of crude oil.

The public offering is part of Saudi Crown Prince Mohammed bin Salman's plan to wean his country off oil and develop other areas of the economy. But getting the massive IPO off the ground has been an arduous process full of false starts.

The Saudi government initially discussed floating 5% of the company in 2018 in a deal that would raise as much as $100 billion. It was looking at international markets such as New York or London, as well as Riyadh.

But the project was shelved amid concerns about legal complications in the United States, as well as doubts about the $2 trillion valuation sought by bin Salman — only to be revived earlier this year after Aramco pulled off a successful international bond sale.

Estimates of how much the flotation will raise vary widely. Bin Salman has reportedly pushed to value Aramco at close to $2 trillion; analysts peg it no higher than $1.5 trillion. Selling even 1% of the company at the bottom of that range would fetch $15 billion, while selling 2% at the top could generate $40 billion, eclipsing the record $25 billion IPO by Alibaba (BABA) in 2014.

Uncertainty will still hang over the IPO process in the coming weeks. Questions remain about international appetite for Aramco shares, and the company is sensitive to the geopolitical environment. It had to delay the IPO process following attacks on Saudi oil facilities in September.

But executives made clear on Sunday that they intend to move forward.

"The question could be, 'Why not now?'" chairman Yasir Al-Rumayyan told reporters at the press conference. "I think this is the right time for us — coming to a juncture where we want to take Aramco to be a public company, to have more disclosure."

The announcement begins a sprint for Aramco's bankers, pulled from top firms such as Goldman Sachs (GS), Morgan Stanley (MS), Citi (C), JPMorgan Chase (JPM) and HSBC (HSBC). Shares could start trading in early December, according to recent media reports.

— Sugam Pokharel contributed reporting.

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https://www.cnn.com/2019/11/03/investing/saudi-aramco-ipo/index.html

2019-11-03 10:25:00Z
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Saudi Arabia announces IPO of world's most profitable company - CNN

The Capital Market Authority of Saudi Arabia said in a statement Sunday that it has approved an application to list shares in Saudi Aramco. It did not say when the highly-anticipated IPO would take place or give details on its size.

Aramco has vast oil reserves and massive daily output. It holds a monopoly in Saudi Arabia, the world's largest exporter of crude oil.

The public offering is part of Saudi Crown Prince Mohammed bin Salman's plan to wean his country off oil and develop other areas of the economy. But getting the massive IPO off the ground has been an arduous process full of false starts.

The Saudi government initially discussed floating 5% of the company in 2018 in a deal that would raise as much as $100 billion. It was looking at international markets such as New York or London, as well as Riyadh.

But the project was shelved amid concerns about legal complications in the United States, as well as doubts about the $2 trillion valuation sought by bin Salman — only to be revived earlier this year after Aramco pulled off a highly successful international bond sale.

Estimates of how much the flotation will raise vary widely. Bin Salman reportedly wants the deal to value Aramco at $2 trillion; analysts peg it no higher than $1.5 trillion. Selling even 1% of the company at the bottom of that range would fetch $15 billion, while selling 2% at the top could generate $40 billion, eclipsing the record $25 billion IPO by Alibaba (BABA) in 2014.

— Sugam Pokharel contributed reporting.

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2019-11-03 08:50:00Z
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Saudi Aramco I.P.O. Is Announced - The New York Times

LONDON — Saudi Arabia said on Sunday that it had approved plans for the giant state-owned oil producer, Saudi Aramco, to go public, taking the country’s crown jewel and what is probably the world’s most profitable enterprise close to its long-awaited goal: becoming a publicly traded company.

The country’s Capital Market Authority said that Aramco planned to sell an unspecified percentage of its shares, which are expected to begin trading next month. Bankers on the transaction have told the Saudi government that investors are likely to value the company at about $1.5 trillion, people briefed on the matter said previously.

Aramco is the behemoth in the oil business, alone producing about one-tenth of the world’s output. Last year, it made $111 billion in net income, almost twice Apple’s profit and many times the earnings of lesser rivals like Exxon Mobil and Royal Dutch Shell.

And Sunday’s announcement sets up what may be the biggest initial public offering ever, with a chance to exceed the nearly $22 billion that Alibaba, the Chinese e-commerce giant, raised in one day in 2014.

But Aramco’s initial public offering will fall short of Saudi Arabia’s audacious goals.

When Mohammed bin Salman, the country’s de facto ruler, first announced plans to take the company public in 2016, he said that the company would be valued at about $2 trillion, that the offering would take place by 2017 and that its shares would trade on both a premier international stock exchange, such as New York, London or Hong Kong, as well as the Saudi exchange in Riyadh.

Yet Aramco appears poised to be valued well short of $2 trillion. And its I.P.O. process has proceeded in fits and starts over the past three years, pausing several times over the complications of readying its finances and operations — long shrouded in secrecy, even as it gushed wealth for its kingdom — for the scrutiny of public investors.

And while Prince Mohammed, the country’s crown prince, had been eager to have Aramco trade on both the Tadawul, the local stock market, and a more prominent stock market, that appears off the table for the time being.

At last week’s investor conference at the Ritz-Carlton Hotel in Riyadh, Saudi officials made clear that the crown prince’s thinking was critical to the I.P.O.

The prince’s older half brother, Prince Abdulaziz bin Salman, who was recently appointed energy minister, told the conference on Wednesday that the listing would be “a Saudi decision first of all and, specifically, Prince Mohammed’s decision.”

Much of the proceeds from the offering are not likely to flow to Aramco’s operations but into the Public Investment Fund, a Saudi sovereign wealth fund that is evolving into the prince’s main vehicle for shifting the country’s economy away from its reliance on oil.

Along with venture capital investments like Uber, the ride-sharing service that has a strong presence in the kingdom, the Public Investment Fund is putting money into renewable energy and enormous real estate projects aimed at creating jobs for Saudis. Neom, a vast futuristic city planned for the northwest of the country, will require $500 billion from the Public Investment Fund and other investors over time, according to its website.

On Wednesday, the fund announced that it was borrowing $10 billion from a group of international banks, including JPMorgan, Citigroup and Bank of America. The loan would help “accelerate” the fund’s investment program, according to a news release.

It is not hard to see why the prince is pressing for quicker results fueled by an Aramco share sale. The economy has yet to see big payoffs from his schemes. Unemployment among Saudi nationals remains elevated at 12.7 percent.

What remains indisputable is how big Aramco is. It earned $46.9 billion in the first half of the year and produced 10 million barrels a day, giving it a financial and production heft that analysts have said would lure in international investors.

Still, questions are likely to dog Aramco executives and their army of advisers as they continue to pitch prospective investors on the offering. Some will center on how the company has recovered from a devastating drone and missile attack in September that temporarily shut down half of its production.

The physical damage may have been largely repaired, but investors will probably remain worried that its facilities remain vulnerable to another assault, given the political tensions between Saudi Arabia and its neighbors.

“There is a risk of further attacks on Saudi Arabia, which could result in economic damage,” said Fitch Ratings in September when it downgraded Saudi Arabia’s credit rating to A, from A+.

Investment in Saudi Arabia has generally been tempered by the killing and dismemberment of the Saudi dissident and journalist Jamal Khashoggi by Saudi agents last year. Prince Mohammed has accepted responsibility for the killing, but denied ordering it. Those concerns, though, were hard to find at last week’s investment conference, where Wall Street executives and world leaders converged.

Aramco’s status as the world’s mightiest oil company comes as concerns about climate change have raised doubt about the future of fossil fuels. Top institutional investors like the Singaporean sovereign wealth fund Temasek have already suggested they will reduce their exposure to fossil fuels, potentially ruling them out as backers of Aramco.

Aramco officials are addressing those concerns by putting around $600 million a year into research and development in areas like more efficient car engines and vehicles equipped with devices for capturing much of the carbon dioxide emissions that they produce.

The company is also investing in plants and joint ventures aimed at funneling more of its oil into chemicals, which Aramco’s leadership believes will see relatively strong growth in the coming decades, when demand for transportation fuels may fall off as alternatives like electric vehicles become more available.

“The pessimism around oil is misplaced,” Aramco’s chief technology officer, Ahmad Al Khowaiter, said in a recent interview at the company’s headquarters in Dhahran. “The growth is in materials; it is in chemicals,” he added.

Michael de la Merced reported from London, and Stanley Reed from Riyadh.

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2019-11-03 06:34:00Z
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How Much Oil Does The U.S. Really Own - OilPrice.com

It’s no secret that the United States produces more crude oil on a daily basis than any other country at 12.6 million bpd, according to the most recent weekly EIA data. But this is domestically. When you look at crude production from US majors operating overseas, just how much of the world’s crude oil do these US giants really control?

Who Produces the Oil?

It may be impossible to get a definitive total, but a look at the reported production from US oil majors against some of the rest of the world’s largest oil companies shows that two of the world’s 10 largest crude oil producing companies are US-based.

(Click to enlarge)

The top 10 oil producers together contribute 34.73 million bpd to the world’s oil supplies, and the two largest US oil majors, ExxonMobil and Chevron, account for 4.13 million bpd of that, or 11 percent.

Compared to total global oil production, which was estimated at 94.7 million bpd, the United States’ top 2 oil producers account for 4.4 percent, based on production. That may not seem like a large figure by itself, but only Aramco—which is responsible for 100 percent of Saudi Arabia’s production, produces more oil than Exxon and Chevron combined.

But the United States has many other heavy hitters when it comes to oil production, and almost all of the oil produced in the United States (12.6 million bpd), is produced by US oil companies.

Related: IEA: An Oil Glut Is Looming

Aside from Exxon and Chevron, other major US oil companies include ConocoPhillips, Occidental, EOG Resources, Anadarko, Marathon, Vaalco, and Devon Energy. And these players operate in countries throughout the globe.

(Click to enlarge)

And the list above is by no means all inclusive, with US oil majors also operating in Trinidad, the United Kingdom, and China. 

In total, US oil companies produce more than 15 percent of the world’s oil.

Who Owns the Oil?

Another way to look at who controls the oil is to look at the proved reserves of the US majors, which accounts for not just their oil reserves held in the United States, but around the globe.

(Click to enlarge)

That list is not all-inclusive either, but it is some of the biggest names in the US oil industry. Combined, these players hold roughly 44 billion boe. Of course, there are many more smaller US companies that hold additional proven barrels.

So how does that stack up?

Well, Aramco’s proved reserves, if the last audit is valid, pegs their proved reserves at 260 billion barrels of oil equivalent.  Rosneft holds 44 billion boe, and PDVSA holds even more, owning a huge chunk of Venezuela’s 300 billion boe.  

Even with Exxon’s massive size, US production and proved reserves is a small portion of the world’s oil, which stands at 1.73 trillion barrels of oil. This is less than 3 percent of the world’s total proven oil resources. Related: Oil Production Paralyzed As Venezuela's Electricity Crisis Worsens

But that doesn’t mean that US oil companies don’t hold sway.

Controlling the Middle East

American oil companies’ presence in the Middle East goes back decades. In 1943, America and Britain were jockeying for pieces of the Middle Eastern oil pie. At that time, the British controlled more than 2/3rds of oil production in the Middle East, and only 14 percent fell under American control.

Source: Multinational Oil Corporations and U.S. Foreign Policy - REPORT together with individual views, to the Committee on Foreign Relations, United States Senate, by the Subcommittee on Multinational Corporations.

But since then, direct American oil company influence in the Middle East has waned, although they have maintained a presence in the Middle East. Today, US oil companies are still alive and kicking across the ocean, including in Iraq, Kuwait, Oman, and Qatar by the likes of Exxon, Chevron, Occidental and more.

Arguments can be made, however, that any US majors operating in the Middle East have little influence over oil produced in the Middle East, and some countries have shoved US majors to the backburner as they nationalized their lucrative oil industries.

America’s oil majors have had a difficult time in other regions of the world as well, leaving many to question how much influence these oil majors really have, should push come to shove.

One need only to look as far as Venezuela, Libya, and Nigeria to see how Western oil companies have sometimes fared overseas. But the oil prize often has so much appeal that even great risks are sometimes just too good to pass up. 

In Venezuela, for instance, former Socialist leader Hugo Chavez nationalized almost all of its oil, seizing assets and kicking foreign oil companies out, at great expense to those oil firms, proving that not even Venezuela, holding the world’s largest oil reserves, was worth it.

Other countries such as Libya and Nigeria have been embroiled in so much internal strife and corruption that some US oil companies have pulled out.

What’s Next

Undeterred, some US majors are keen to go exploring in other countries, and the most interesting spot today for this exploration seems to be Guyana and its neighbor, Suriname. And already concerns have been voiced that Exxon in particular got a crazy good deal in Guyana, with some calling Exxon’s deal exploitative.

And like the Middle East when petroleum was first discovered, Guyana and Suriname have zero experience with petroleum, and their policies for oil have not yet been established—prime ground for US majors. 

If history is any indication of this will go, the oil majors bold enough to dip their toe into those literal waters could one day find themselves kicked to the curb after developing the oil and gas resources, but we’d bet good money they have planned for such a contingency.

With US majors controlling as much as 15 percent of the total oil produced globally, US producers have a powerful position in the world. And with the United States accounting for 98 percent of the world’s total production growth in 2018, and the trend likely to continue, its influence will only solidify in the coming years. 

By Julianne Geiger for Oilprice.com

More Top Reads From Oilprice.com:

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2019-11-02 23:00:00Z
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Berkshire Hathaway's cash pile soars to $128 billion with Warren Buffett yet to make big acquisition - CNN

Berkshire on Saturday reported it has $128 billion in cash, up from $122 billion in the second quarter.

Berkshire Hathaway (BRKA) has lagged the market this year, and Buffett has said that he wants to make an "elephant" sized acquisition with the company's mountain of cash. The problem is that the market rally has made any potential targets much more expensive, and Buffett has said he doesn't want to overspend on deals.

Berkshire's operating profit rose to $7.9 billion, up from $6.9 billion a year earlier, boosted by gains across its holdings. The Omaha, Nebraska-based company's performance is tied to its many subsidiaries -- which include GEICO, railroad Burlington Northern Santa Fe and consumer brands like Duracell, Dairy Queen and paint maker Benjamin Moore -- as well as a massive investment portfolio.

While Berkshire has yet to make a major acquisition, the company has been taking steps to embrace more reasonably valued tech stocks in recent years. Berkshire Hathaway still owns large stakes in value stalwarts like Coke, (KO) Bank of America (BAC), Wells Fargo (CBEAX) and Kraft Heinz. (KHC)

But the company's biggest holding now is Apple (AAPL), and Berkshire even has a small stake in Amazon (AMZN).

Berkshire Hathaway also purchased $700 million of its own stock in the third quarter, an uptick from the $442 million it bought last quarter. The company purchased $1.7 billion of its own shares in the first quarter.

Previously, the company did not allow stock buybacks. The board changed a rule last year to allow the company to begin purchasing back billions of dollars worth of stock, a practice that has been criticized by some analysts as inflating share prices.

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2019-11-02 14:44:05Z
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Berkshire Profit Hits a Record as Buffett's Cash Pile Grows - yahoo.com

(Bloomberg) -- Berkshire Hathaway Inc.’s operating profit jumped 14% to a record as Warren Buffett’s conglomerate saw gains from its railroad and got some long-awaited earnings from Kraft Heinz Co.

Operating earnings climbed to $7.86 billion in the third quarter as investment income rose and Berkshire’s reinsurance group had the first underwriting profit in more than a year despite losses from a Japanese typhoon. Revenue climbed 2.4% on increases from the company’s insurers and manufacturing businesses.

The results pushed Buffett’s cash pile to a record $128 billion, even as he completed a $10 billion investment in Occidental Petroleum Corp., his chunkiest purchase in more than year. Aside from that deal, Buffett was a net seller of stocks in the quarter and bought back less of Berkshire’s own shares than some analysts expected, raising more questions over how long the legendary investor will wait to use his dry powder.

The fact that Buffett’s sprawling businesses are spitting out cash faster than he can find good places to invest it is a problem many companies would envy. But there are signs that the idle funds are weighing on growth, and Berkshire’s stock is on track for its worst underperformance since 2009. The company’s Class A shares gained 5.7% this year through Friday’s close, short of the 22% climb in the S&P 500 Index during that time.

Berkshire recognized $467 million in gains related to its share of Kraft Heinz’s profit in the first nine months of 2019. The gains came all at once after the stake left a blank spot in Berkshire’s results for two quarters as the packaged food giant delayed reporting results amid regulatory probes.

Buffett has been stung by Kraft Heinz’s stumbles over the past year. After Kraft Heinz announced a $15.4 billion writedown in February, Berkshire said it would take a $2.7 billion charge on its stake. Kraft Heinz released first-half results in August and was back on track in October, when it reported third-quarter profit that beat analyst estimates. That sent shares climbing to their highest level since May, though they’re still well below Berkshire’s carrying value. Berkshire said Saturday it didn’t believe an impairment charge was necessary at this time.

Buffett’s railroad was able to open up all key routes in the third quarter that had been impacted by flooding. The 5% profit gain at Berkshire’s railroad, BNSF, also benefited from higher rates on shipments even as volumes fell.

Berkshire’s $700 million of repurchases in the quarter was a nearly 75% increase from the amount of stock the company bought back in the second quarter. Still, third-quarter buybacks fell short of Berkshire’s record repurchase of $1.7 billion stock in the first quarter and was lower than the $900 million estimated by analysts at UBS Group AG.

While Buffett received more flexibility to buy back shares last year, his repurchases have been modest compared to other giant companies, especially financial firms. Bank of America Corp. said in June that it planned to repurchase more than $30 billion of its stock over the next year.

More key figures from the results:

Pretax earnings from Berkshire’s group of manufacturers, which includes Precision Castparts Corp. and Marmon, jumped 4.9% in the third quarter. That was boosted by gains at Precision due to demand for aerospace products and increases at Clayton Homes, which manufactures mobile homes and has been expanding into site-built construction.Net earnings slipped 11% to $16.5 billion. Under new accounting rules, Berkshire has to report swings in its investment portfolio in its net income figures. The unrealized gains during the third quarter were about $8 billion compared to a gain of $10.2 billion in the same period a year earlier.

(Updates with details throughout.)

To contact the reporter on this story: Katherine Chiglinsky in New York at kchiglinsky@bloomberg.net

To contact the editor responsible for this story: Michael J. Moore at mmoore55@bloomberg.net

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

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2019-11-02 13:48:00Z
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Saudi Crown Prince approves kick-off of Aramco IPO on Sunday, sources say - CNBC

An employee in a branded helmet is pictured at Saudi Aramco oil facility in Abqaiq, Saudi Arabia October 12, 2019.

Maxim Shemetov | Reuters

Saudi Arabia's Crown Prince Mohammed bin Salman on Friday agreed that the initial public offering of state oil giant Aramco will be announced on Sunday, five sources familiar with the matter told Reuters.

The world's top oil company will announce its intention to float on Nov. 3, the sources said.

"The crown prince finally gave the green light," one source said.

Aramco declined to comment.

Saudi Aramco officials and advisers have held last-minute meetings with investors over the past few days in an attempt to achieve as close to a $2 trillion valuation as possible ahead of an expected listing launch on Sunday, according to sources.

The final meeting by the Saudi government on Friday evening was to decide whether to go ahead with the listing.

To achieve $2 trillion, in the largest IPO in history, Riyadh needs the initial listing of a 1%-2% stake on the Saudi stock market to raise at least $20 billion-$40 billion.

The listing is the centerpiece of the crown prince's plan to shake up the Saudi economy and diversify away from oil. But there have been various delays since it was first announced in 2016.

Prince Mohammed wants to eventually list a total of 5% of the company. An international sale is expected to follow the domestic IPO.

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2019-11-02 07:47:52Z
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