The Kingdom of Saudi Arabia is the largest economy in the Middle East and is considered to be an energy superpower country. The country possesses around 20 percent of the world’s proven petroleum reserves, ranks the second-largest crude oil producer and largest oil exporter in the world. Even though the country is trying to shift its reliance on the non-oil sector through its Vision 2030, oil production still plays a major role for the KSA economy. In fact, the oil and gas sector accounts for nearly half of the country’s GDP and about 70 percent of export earnings.
The state-owned Saudi Aramco owns the majority of the oil production. Based in Dharan and officially known as the Saudi Arabian Oil company, Aramco is the world’s largest oil producer. According to Bloomberg, it is among the largest companies in the world by revenue and the most profitable company in the world.
However, Saudi Aramco has rarely shared comprehensive information about its figures. In fact, the first ever report was published in April. In the statement the company reported a net income of $118 billion on revenues of $356 for 2018, making it more profitable than Apple and Exxon Mobil. The report came out to support Saudi Aramco first International bond issue, which raised $12 billion and received more than $100 billion of ordering from foreign investors, breaking all records for a bond issued by an emerging market entity.
Saudi Arabia is aiming to shift its reliance on the oil sector to become a more service-centered economy. The listing of Saudi Aramco could help the country to collect huge investments to support the funding of the Kingdom Vision 2030. The company has been working towards its Initial Public Offering (IPO), which was initially planned for this year. However, due to recent political turmoil and swing in the oil market, the IPO has faltered. According to the CEO, at this stage, Saudi Aramco will be ready for its IPO by 2021.
To show its potential for raising money, Saudi Aramco has recently disclosed its half-year earnings report. The statement registered a decrease of around 10% on earnings, from $53 billion in 2018 to $46.9 billion. However, it still appears impressive and the recent disclosure could help the company to support its long delayed IPO. Sharing detailed information about the company’s performance represents a historic moment for Saudi Aramco, which has long been known as a more secretive company.
Amidst skepticism over the company evaluation and swing in oil prices, the company’s IPO plan could still result in the largest listing of all time. The company has disclosed that it wants to list the five percent of the company, which would raise $100 billion at a market value of $2 trillion. Investors recognize the great potential and opportunity that this IPO offers, but many of them realize that they would have no control over the company’s strategic plans.
The report, which showed a decrease from earnings of the previous year, added more geopolitical issues that could pose challenges for Saudi Aramco. Therefore, if it aims to be successfully listed, it must show its reliability and sustainability to global markets, and both existing as well as future investors.
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