Complex Made Simple

Aramco’s $2 trillion valuation is mostly, but not all, about rising oil prices

Aramco
Image Source: dunya.com

Saudi Arabia’s oil company Aramco reached a $2 trillion valuation on October 6, 2021, placing third in the world in market capitalization. Thank oil prices for that, but Aramco is not a company sitting on its laurels

Brent Crude began September at around $71 a barrel and closed October 5 at more than $82 Aramco raked in a net income of approximately $47bn in the first half of 2021 Aramco announced a major expansion of its industrial investment program, Aramco Namaat

Saudi Arabia’s oil company Aramco reached a $2 trillion valuation on October 6, 2021, placing third in the world in market capitalization behind Microsoft and Apple.

US computer giants Apple and Microsoft were valued at more than $2.3 trn and more than $2.1 trn, respectively, according to the financial news outlet Bloomberg.

The Saudi oil giant’s increase in value followed soaring oil prices recently. The price of Brent Crude began September at around $71 a barrel. It closed Tuesday, October 5, at more than $82 a barrel, the highest in 7 years.

Bank of America Corp. analysts did predict that global energy crunch could help propel oil prices above $100 a barrel for the first time since 2014.

Driving up oil prices is continuing demand for energy despite the pandemic’s continued toll on travel and other key petrol-dependent sectors.

Aramco Saudi
Image Source: denizhaber.com

Less than 2% of Aramco is publicly listed on the Saudi Tadawul stock exchange, but shareowners saw Aramco stocks trading at about 37.6 riyals a share (above the average of 35.5 SAR), or a few cents over $10 a share, by midday Wednesday before dipping to 37.2 riyals a share, or about $9.92 a share.

Aramco has stuck to its promise to pay an annual dividend of $75 billion until 2024 to shareholders, the biggest stake of which is owned by the Saudi government, owners of 98% of the company.

Aramco raked in a net income of approximately $47bn in the first half of 2021, double what it earned during the same period last year when the coronavirus grounded travel and pummeled global demand for oil. Demand for oil is forecast to hit 99 million bpd by the end of 2021, and a little more than 100 million bpd in 2022.

Good news for Aramco and shareholders, but the company is also expanding and investing in areas that will raise its valuation beyond oil production and prices.

Aramco’s industrial investments

Aramco announced a major expansion of its industrial investment program, Aramco Namaat, with the signing of 22 new MoUs and 1 joint venture (JV) agreement focused on capacity building in four key sectors: sustainability, technology, industrial and energy services, and advanced materials.

According to Aramco Chairman, Yasir Al-Rumayyan, “Such initiatives help further drive economic growth and diversification, …ensure greater reliability of energy supply.”

Aramco President & CEO, Amin H. Nasser, said: “Namaat offers our partners significant opportunities to participate in Aramco’s long-term growth strategy. The benefits for everyone involved are multiple as well as mutual. We believe these exciting target sectors offer significant opportunities for all the current and prospective parties involved.”

The 22 new MoUs signed under the Namaat program include:

1- SOLVAY: An MoU with the goal to pursue the development of advanced non-metallic materials and localization of a composite value chain

2- DHL Supply Chain: An arrangement to evaluate the feasibility of establishing a local industrial logistics and procurement hub serving Saudi Arabia and the MENA region

3- VEOLIA: Exclusive MOU to confirm the commercial feasibility of establishing a world-class integrated waste management company

4- Air Liquide & Haliburton & PIF, Baker Hughes & PIF, Linde & Schlumberger & PIF:        3 separate non-binding MoUs to evaluate Carbon Capture & Sequestration (CCS) opportunities and potential partnerships

5- AIC Steel, GSW, McDermott, Seyang and Sendan, and NARMEL: 5 separate MoUs on modular construction

6- Samsung Engineering, Hyundai, and Saipem: 3 separate MoUs on engineering, procurement, and construction (EPC)

7- Honeywell: An MoU with the goal to establish a JV that will develop and implement next-generation digital solutions that will improve efficiency, sustainability and enable operational excellence of industrial facilities

8- AVEVA: An MoU with the goal to establish a strategic alliance to localize the development and deployment of various digital technologies including Artificial Intelligence (AI), Machine Learning (ML), and Digital Twin

Previous MOUs were first unveiled in November 2020 and included collaborations with Shell and AMG Recycling B.V., and Suzhou XDM 3D Printing Company Ltd, focusing on new business development in metal reclamation and commercial opportunities in industrial 3D printing.

These programs aligns with major initiatives intended to drive world-class energy and industrial ecosystems in Saudi, such as King Salman International Complex for Maritime Industries and Services, King Salman Energy Park (SPARK), and the forthcoming LAB7 innovation hub.