Saudi Arabia Sets Up New Aramco Share Sale That Could raise $13.1bn
Editor
31 May 2024 08:34 WIB
DIVERSIFICATION DRIVE
Saudi Arabia's de-facto ruler MbS, as the crown prince is known, has poured hundreds of billions of dollars through the kingdom's sovereign wealth fund into mega projects, and everything from electric vehicles to sports and a new airline, to diversify the economy away from hydrocarbons and create jobs.
But lower oil prices and production weighed on economic growth last year while spending rose, leading to a fiscal deficit of around 2% of GDP, with a similar deficit expected this year.
Aramco introduced a special performance-based dividend last year, providing cash to the kingdom and helping to lure new investors.
The company has also signed up more banks as market-makers to help improve liquidity in the shares.
The world's biggest oil exporter trades at a higher price-to-earnings ratio than other global oil companies, including ExxonMobil, BP and Shell.
The stock is down about 12% this year, while shares of ExxonMobil and BP are up around 14% and 4% respectively.
Saudi Arabia is the de facto leader of the Organization of the Petroleum Exporting Countries, helping engineer price moves on world oil markets.
Aramco currently produces about 9 million barrels of crude a day, about three-quarters of its maximum capacity, to comply with output cuts agreed upon by OPEC and its allies, known as OPEC+.
OPEC+ is set to decide its next production policies on Sunday, and several sources and analysts expect the meeting to roll over existing cuts into the second half of 2024.
Should OPEC+ surprise the market and cut production further, oil prices could rise from the current roughly $82 a barrel, but Aramco would have to reduce output and face even lower revenues.
($1 = 3.7506 riyals)
REUTERS
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