Is Saudi Arabia Broke?

I ask this question because of a report that I read last week……I seems that the oil arm of the Saudi royal family, ARAMCO, is about to offer an IPO on the stock exchange……

Saudi Arabia began an initial public offering Sunday of a sliver of oil giant Saudi Aramco after years of delay, hoping international and local investors will pay billions for a stake in the kingdom’s crown jewels, reports the AP. An approval by Saudi Arabia’s Capital Market Authority served as the starting gun for an IPO promised by Crown Prince Mohammed bin Salman since 2016. But unlike traditional IPOs, Saudi Aramco offered no hoped-for price range nor idea how much of the firm would be offered on Riyadh’s Tadawul stock exchange. Analysts say the kingdom likely hopes local investors will push share prices toward a desired $2 trillion valuation and buoy that price ahead of any further listing abroad. Saudi Aramco made a point in its filings to highlight its profitability and low costs through data once held as a state secret by the royal family, euphemistically referred to as its “current shareholder.”

However, economic worries, the trade war between China and the US, and increased US crude oil production have depressed energy prices. A Sept. 14 attack on Saudi Aramco spooked some investors, with one ratings firm already downgrading it. It’s hard to overstate Saudi Aramco’s power: It produces over 10 million barrels of crude oil a day, some 10% of global demand. The firm’s net income in 2018 was $111.1 billion, far beyond the combined net income of oil giants BP, Chevron, Exxon Mobil, Royal Dutch Shell, and Total SA. Al-Arabiya reported last week that pricing for the stock will begin Nov. 17. A final price will be set Dec. 4, with shares beginning to be traded on the Tadawul on Dec. 11. Analysts say a $2 trillion valuation—Apple and Microsoft are $1 trillion each—may be a stretch. By announcing the start of the IPO on Sunday, Prince Mohammed may have been convinced to take a lower valuation in order to get the IPO moving.

Why would the Royals who own the oil in Saudi want to submit to the regulations of a stock exchange?

Then maybe Gen. Petraeus has the answer……

Gen. David Petraeus, the retired four-star Army general and former head of the CIA, told CNBC on Thursday that Saudi Arabia is “gradually running out of money.”

Petraeus said the Saudi’s need their initial public offering (IPO) of the state-run oil company Aramco, to be successful. In December, the Saudis plan on releasing some shares of Aramco to the public in an effort to attract outside investors.

The IPO is part of Crown Prince Mohammad bin Salman’s “Vision 2030,” his effort to diversify Saudi Arabia’s economy and reduce its dependence on oil exports. Petraeus said Saudi Arabia’s budget deficits can be “anywhere from $40 to $60 billion” each year, depending on the price of oil.

When asked about other people’s criticisms of the crown prince, Petraeus said it was in the entire world’s interest to see “Saudi Arabia succeed” and to also see it “moderate” some of its practices.

(antiwar.com)

Petraeus is currently the chair of the KKR Global Institute, a branch of the American global investment firm KKR. Petraeus said there is no KKR investment into Saudi Arabia he is aware of yet, and that the Saudis need to “regain the confidence of all the investors of the world.” But Petraeus did say KKR has invested elsewhere in the region and put $2 billion into the United Arab Emirates’ Abu Dhabi National Oil Company.

Why is Saudi running out of cash?

Why would the Royals allow someone to gain control over their production?

I Read, I Wrote, You Know

“Lego Ergo Scribo”

4 thoughts on “Is Saudi Arabia Broke?

    1. There is something going on there…..why would they take the chance of someone from “outside” going to the Board? MbS is doing something sneaky I have no doubt….chuq

  1. Good way for the royal family to raise cash to use to diversify. The government can always impose laws and regulations as to production. There are ways for the royal family legally to retain control. And they can always National the oil and take it back from the corporation. The government may be afraid to reduce the budget and public benefits and do they continue the budget deficits. Much like we do here.

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