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Saudi Aramco, the very best worthwhile oil firm on this planet

Crown Prince Mohammed bin Salman

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Crown Prince Mohammed bin Salman

The drone attack that created a stir in the crude oil market, there is currently a situation of confusion about its responsibility. But the one that was attacked is drawing the most attention: Saudi Aramco, the highest-profit company in the world.

With a production of 10 million barrels per day and earning US $ 356,000 million, this Saudi Arabian state-owned oil company also holds the title of the world's largest oil company. And soon, there is one more to come: to be the company with the largest IPO in history.

However, this week the company made headlines for another reason: its two plants were targeted by drones, which caught fire and caused a lot of damage. Due to this loss, the supply of crude oil is likely to be affected worldwide.

The attack has affected the country's largest Aqqiq refinery and the second largest Khuras oil field.

Since then, there have been continuous reports about the impact of both attacks.

Saudi Arabia's Energy Minister, Abdul Aziz bin Salman, said that the country's oil production has come down to about 5.7 million barrels per day. Which is about half of the normal.

When the stock market opened on Monday, the effect of this fall started showing in the prices of crude oil. Prices went up by 15 percent to 20 percent, in the same time the price in Brent reached the highest at US $ 71.95.

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Prices stagnated when US President Donald Trump announced that he would approve the use of US protected oil reserves when needed to keep the world supply right.

America blames Iran for the attacks. However, the Yemeni Houthi rebels have claimed responsibility for the attacks. He is fighting a civil war against the international alliance led by Saudi Arabia. This bloody civil war has been going on for more than four years.

In global supply 5% lack of

Why are attacks on just one company causing such serious consequences?

Because 10 percent of the world's oil goes from Saudi Arabia. Therefore a loss of 5.7 million means a 5 percent reduction in global supply.

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Analysts at Swizz Financial Services Company UBS said in a note, "The 5 percent reduction in global oil supply from just one attack is a matter of great concern. These amounts are the total production of countries outside OPEC between 2014 and 2018. More than that. "

Many analysts believe that this company is now in the grip of geopolitical danger. And now investors will definitely consider this point.

In 2016, Crown Prince Mohammed bin Salman of Saudi Arabia announced the company's IPO. Aramco has been preparing for this for many years.

This is a big part of the Crown Prince's ambitious reform program. Those who want to diversify the Saudi economy, so that they are no longer dependent on oil.

It was to be implemented in 2017 or 2018, but its date was postponed several times.

The company has to spend many years to prepare for this. According to Forbes magazine, "Aramco did not even have books of accountancy according to international standards in 2016. Neither did it have formal records of institutional charts and structures."

It is no surprise that Aramco's economic status was a mystery for four decades.

However, when the government sells a part of the company, the secret will be exposed. It is being speculated from the news coming after the attack that this can be done in two phases.

In the first phase, one percent of the shares will be sold in Saudi Arabia by the end of the year. In the second phase, shares will be sold abroad in 2020. However, no information has been made public about where these will be sold.

According to the Wall Street Journal, Saudi authorities are in talks to postpone the IPO until production returns to normal.

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Two billion dollar company

This question has been arising and will continue to arise, what is the economic status of Aramco.

According to Saudi, Aramco is a two billion dollar company. If this estimate is correct, then it means Aramco's price is four times higher than its close competitor Apple.

Analysts believe that Riyadh's strategy is too optimistic. So much so, this will double its value. But if the value of the company is half of that, then getting an IPO would be historic.

Advantages and hazards

Asha Mehta, head of Emerging Markets Strategy at Acadian Asset Management, told the BBC, "Aramco has emerged as the highest-grossing company in the world."

According to him, "Given the many and productive oil fields of the country, the company benefits because of the large oil reserves, unique level of production and low cost of production."

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Mohammed bin Salman's reforms

One issue that is directly related to the company's IPO is the liberalization of the economy. Analysts say, "The company has made rapid changes and has associated itself with the global capital market in a short time."

The Crown Prince has promoted his strategic plan "Vision 2030", which seeks to change the image of a deeply conservative country and move to open doors to foreign private capital.

For this, he launched an anti-corruption campaign. Gave symbolic messages to the west by giving the cinema house and women the right to drive.

However, his image was also tarnished by the assassination of Saudi journalist Jamal Khashojji at the Embassy in Turkey last year.

According to the United Nations, "there is substantial and reliable evidence of the Crown Prince's involvement in this crime."

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Despite this, other governments and companies have commercial relations with Saudi and have had no impact on a company like Aramco.

Antonio de Cruz, executive director of the Inter-American Trends Consultancy, told the BBC, "Aramco is a profitable company because it produces more crude oil than Shell and Exxon, has a lower debt and produces The price also falls. "

According to analysts, the debt would be around US $ 20,000 million and they produce hydrocarbons at a price of US $ 4 per barrel. While their closest rivals cost 20 USD.

"I think Aramco's commercial value could be between US $ 1.3 and US $ 2 billion," says Kruse.

"According to him the company has the world's largest hydrocarbon reserves. That is about 261 billion barrels."

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