Investors bust out their wallets for Saudi Aramco

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Investors bust out their wallets for Saudi Aramco

Last week it was widely reported that Saudi Aramco’s well-oiled ties to the Saudi Arabian government had investors trepidatious on the prospects of the oil giant preparing for a $15B bond sale.

Yeah… about that.

Investors proved the sunny-side consensus wrong after Saudi Aramco hauled in a record $100B in orders.

Greasin’ the wheels

For decades, Saudi Aramco kept its oil spoils quiet. But, since Prince Mohammed’s connection to Jamal Khashoggi’s murder became public, the state-run oil giant decided it owed potential investors some good-guy reassurance.

In a push to prove transparency, Saudi Aramco opened its books and, spoiler alert: They’re not just crude rich — they’re crudely rich.

In 2018, Saudi Aramco produced almost 1 in 8 barrels of the world’s crude oil supply and mined $111.1B in net income… hold for paralysis… yeah. That’s more than Apple, Amazon, and Alphabet combined.

And what do you know, investors came running

“I mean, it’s just a murder — put me down for $50m!”

Aramco’s open books caught oily investors hook, line, and sinker; Saudi Aramco (and its puppet masters) knew showing the goods would convince paper chasers to let Prince Mohammed’s bygones be bygones.

An oilman with a plan…

The bond sale will help finance Aramco’s $69B acquisition of another Saudi state-controlled company, petrochemical manufacturer, Saudi Basic Industries Corporation.

After Aramco’s announcement to go public was received poorly by investors in the fall, Prince Mohammed constructed the Sabic (Saudi Basic’s nickname) deal as an alternate way to raise money sans stock market.

Now, much of the cash from the deal will end up going toward the country’s sovereign wealth fund (a majority owner in Sabic), which plans to invest in Western technology to help rid the Saudi economy of its oil dependence.

And the cherry on top…

While it was assumed Aramco’s move to go public was canceled after it was left high and dry in the fall, Aramco officials have now indicated the public offering was only “postponed,” not canceled — meaning there still could be some public oil left in the drum.

As The New York Times put it, “the recent meetings with investors may prove a kind of dress rehearsal. An intense, yearslong preparation for the IPO helped make the bond possible.”

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