Wood Mackenzie values Aramco at $400 billion, despite claims of $2 tr by Saudis

[bryant.coleman]

https://www.bloomberg.com/news/articles/2017-02-23/saudi-arabia-2-trillion-aramco-vision-runs-into-market-reality

A few days back, the Saudi officials announced that they are valuing the Aramco at around $2 trillion, and the 5% stake sale was expected to bring around $100 billion to the state exchequer. Seems like they got their calculations wrong. Wood Mackenzie, a global leader in consultancy services for the petroleum industry today valued the Aramco at just $400 billion, meaning that the 5% stake sale will fail to cover even 10% of the budget deficit.

[Hydrogen]

This could signal Wood Mackenzie believes we're past a point of peak oil.

The implications of that could be a frightening thing as oil is used in nearly everything society needs to function and sustain itself.

The outlook is looking better now than a decade ago, we've found many alternatives to oil in industry and elsewhere.

Still have to wonder if a transition to a post oil world would be a smooth and non-violent one.

[Sithara007]

I think that it is a fair valuation. Look at Rosneft, which is almost producing 6 million barrels of oil a day (compared to 10 million for Aramco). Rosneft is having a market cap of just $60 billion. Then why should the Aramco be valued 33 times that much?

[Hydrogen]

I think that it is a fair valuation. Look at Rosneft, which is almost producing 6 million barrels of oil a day (compared to 10 million for Aramco). Rosneft is having a market cap of just $60 billion. Then why should the Aramco be valued 33 times that much?

There's a school of thought that says OPEC and oil producers conspire to reduce oil production to make oil a scarce resource & artificially boost oil prices.

That could be one reason Aramco's oil production is so low. Its to reduce oil supply & artificially boost oil prices.

In terms of overall valuation, the total barrel estimate, of oil wells they own the rights to is probably the main factor.

Of course these are generalizations, there are other variables and factors in play.

[Mometaskers]

The Saudis sure are desperate for cash. The drop in oil prices really hurt them, especially since around 80% of its income is dependent on oil sales. Talk about stuffing all your eggs in a hole in the sand and sticking your head in it too. They've already tried to lower the production but they can only raise prices up to a certain point. China's economy is slowing down and it's reducing demand. That KSA have a booming young population and that most of the jobs are in government AND related to oil also isn't helping them.

This could signal Wood Mackenzie believes we're past a point of peak oil.

The implications of that could be a frightening thing as oil is used in nearly everything society needs to function and sustain itself.

The outlook is looking better now than a decade ago, we've found many alternatives to oil in industry and elsewhere.

Still have to wonder if a transition to a post oil world would be a smooth and non-violent one.

Well I hope it would be smoother than most people predict. I'd definitely be glad to see oil go, not just because of its environmental impact but to also have the money out of the hands of extremists.

[Sithara007]

The Saudis sure are desperate for cash. The drop in oil prices really hurt them, especially since around 80% of its income is dependent on oil sales. Talk about stuffing all your eggs in a hole in the sand and sticking your head in it too. They've already tried to lower the production but they can only raise prices up to a certain point. China's economy is slowing down and it's reducing demand. That KSA have a booming young population and that most of the jobs are in government AND related to oil also isn't helping them.

They can't increase the prices beyond a certain limit. The American shale oil producers have cut their production costs to $30 to $50 per barrel (depending on the geological formation). If the prices stay at $55 per barrel for a long duration, then the shale oil producers will flood the market with their crude.

[Kemarit]

I think the Saudi's has somewhat ballooned their valuation, to somewhat help them
in Aramco's IPO. We don't know how they made such huge valuation, or what factors
or multiplier they used to get that value. Do they take in consideration the millions or
billions of reserves under the oil fields and multiple it by how many dollars?

But one thing for sure why the Saudi government is offering a public IPO of Aramco,
I think they have known already that the used of crude oil is already peaking, and
most of the motor company today want to use hydrogen to all new models of
car replacing  the traditional oil engine models.

[Mometaskers]

The Saudis sure are desperate for cash. The drop in oil prices really hurt them, especially since around 80% of its income is dependent on oil sales. Talk about stuffing all your eggs in a hole in the sand and sticking your head in it too. They've already tried to lower the production but they can only raise prices up to a certain point. China's economy is slowing down and it's reducing demand. That KSA have a booming young population and that most of the jobs are in government AND related to oil also isn't helping them.

They can't increase the prices beyond a certain limit. The American shale oil producers have cut their production costs to $30 to $50 per barrel (depending on the geological formation). If the prices stay at $55 per barrel for a long duration, then the shale oil producers will flood the market with their crude.

Exactly, any attempt to have it hit the roof would also benefit the US. Also, currently the market can only tolerate a certain increase in price. Seems it's quite sluggish these past few months.

[Slark]

It is not the first time we see situation where evaluation of company's worth differs greatly from the owners of the company tell us and what analysts are saying.
I expect that for the sake of IPO every company is increasing their value, it is rather standard procedure.
But what Saudis did is either mind bugging stupidity, inability to estimate true worth of oil company or simple cheat.

[Sithara007]

The Saudis sure are desperate for cash. The drop in oil prices really hurt them, especially since around 80% of its income is dependent on oil sales. Talk about stuffing all your eggs in a hole in the sand and sticking your head in it too. They've already tried to lower the production but they can only raise prices up to a certain point. China's economy is slowing down and it's reducing demand. That KSA have a booming young population and that most of the jobs are in government AND related to oil also isn't helping them.

They can't increase the prices beyond a certain limit. The American shale oil producers have cut their production costs to $30 to $50 per barrel (depending on the geological formation). If the prices stay at $55 per barrel for a long duration, then the shale oil producers will flood the market with their crude.

Exactly, any attempt to have it hit the roof would also benefit the US. Also, currently the market can only tolerate a certain increase in price. Seems it's quite sluggish these past few months.

The cost of crude oil extraction in the United States has come down, as new technology (such as horizontal drilling) is being used. Any increase in the crude oil price above the current levels will trigger a strong correction in the near future.