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Can someone explain to me how the sale of 5% of Aramco will yield $2T? Certainly they don't believe Aramco is worth $40T?
by aerodog 11y ago
Can someone explain to me how the sale of 5% of Aramco will yield $2T? Certainly they don't believe Aramco is worth $40T?
- 100timesthis 11y agointeresting read about that http://www.bloomberg.com/news/articles/2016-01-07/too-big-to-value-why-saudi-aramco-is-in-a-league-of-its-own http://www.bloomberg.com/news/articles/2016-01-07/too-big-to...
- msellout 11y agoWikipedia says there are an estimated 268 billion barrels in Saudi Aramco's proven oil reserves, with maybe 90 billion more undiscovered. It produces somewhere between 3 and 4 billion barrels annually. If a barrel of oil is worth about $50, then the total value of Aramco is about $18 trillion. We can put a discount on that for time, but you might also want to consider that oil will get more difficult to pump out of the ground and price should increase faster than inflation. CPI is pegged to the price of oil, so all this stuff gets complicated.
- acchow 11y agoYou need to measure how much profit they'll make from the oil, not the revenue it will generate.
- Scarblac 11y agoMind you, that estimate has remained unchanged since the late 80s, even though about 100 billion barrels have been extracted since then. OPEC quotas are based on a country's reserves. Take with a lot of salt.
- scurvy 11y agoThe problem with that valuation is the fact that the IPO shares won't have any rights to the oil reserves. The devil is in the details. I'm sure most people buying stock think that they're buying part of SA's riches, but you're really only buying into the poorly run service company that extracts it.
- dwaxe 11y agoTheir sovereign wealth fund is currently sitting at $700M. The Aramco IPO will hardly be the only contributor on the way to $2T.
- pliny 11y agoAramco represents more than half of Saudi Arabia's GDP, and at best they should be able to net $0.5T by selling 5%. How do they find another $1.5T? $700M is 0.05% of that.
- auntienomen 11y agoThis is either a typo or an English-American collision. The SA wealth fund is sitting on 0.7 trillion dollars.
- cmdkeen 11y agoTypo in the parent - their Sovereign Wealth fund has assets of ~$700 billion. Though they've been using it heavily to prop up state spending with the collapse in the oil price and war in Yemen.
- joeyspn 11y agoHere's some interesting info... "Based simply on its oil reserves and using a conservative valuation of roughly $10 per barrel, Aramco could be worth more than $2.5 trillion." [0] Then: - $45/barrel (current price) --> roughly $11.25 trillion - $100/barrel --> $22.5 trillion etc Thing is, where will the barrel price go? Any major or minor [1] event can move the price up or down. [0] http://www.bloomberg.com/news/articles/2016-01-07/too-big-to-value-why-saudi-aramco-is-in-a-league-of-its-own http://www.bloomberg.com/news/articles/2016-01-07/too-big-to... [1] http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7862246/How-a-broker-spent-520m-in-a-drunken-stupor-and-moved-the-global-oil-price.html http://www.telegraph.co.uk/finance/newsbysector/energy/oilan...
- scurvy 11y agoThe Aramco IPO doesn't include any reserves. Those remain 100% sovereign. You're just buying into the services company.
- scurvy 11y agoThanks for downvoting something 100% true? It's trivial to Google the source, but here you are. Straight from the CEO's mouth to print. http://www.wsj.com/articles/potential-saudi-aramco-ipo-wont-include-reserves-1453627558 http://www.wsj.com/articles/potential-saudi-aramco-ipo-wont-...
- welder 11y agoPlanet Money says they are estimated to be worth $4T total [1] [1] http://www.npr.org/sections/money/2016/02/03/465476188/episode-681-the-oil-kingdom http://www.npr.org/sections/money/2016/02/03/465476188/episo...
- joosters 11y agoWhat's odd is that they are talking about selling the stake when oil prices are near record lows. The other worrying point is that if Saudi is selling their oil production, why on earth would you want to be a buyer?