|02 January, 2020

Saudi Aramco lives up to its reputation as the best performing company

The company raised $25.6bln through the IPO

Saudi Aramco logo is pictured at the oil facility in Abqaiq, Saudi Arabia October 12, 2019. Image used for illustrative purpose.

Saudi Aramco logo is pictured at the oil facility in Abqaiq, Saudi Arabia October 12, 2019. Image used for illustrative purpose.

REUTERS/Maxim Shemetov
Saudi Arabia - The initial public offering (IPO) of Saudi Aramco undoubtedly qualifies to be called the biggest business event of 2019.

The company raised $25.6 billion through the IPO, which has made it the largest (IPO) in history, knocking the Chinese e-commerce giant Alibaba off the top spot for the biggest ever public offering.

Saudi Aramco’s shares value jumped on the second day of trading (Dec.12) in the Saudi Stock Exchange (Tadawul) pushing the oil giant to a more than $2-trillion valuation.

Reaching such value made Saudi Aramco the world’s largest-ever market value listed company in a stock market on earth and in the history of the stock markets’ IPO & listings, superseding Apple’s market value of about $1.2 trillion.

Saudi Aramco’s performance on the stock market was expected as it is the world’s largest integrated oil and gas company. In the first six months of 2019, it produced 13.2 million barrels per day of oil equivalent including 10 million barrels per day of crude oil (including blended condensate).

Moreover, the company’s crude oil production accounted for approximately one in every eight barrels of crude oil produced globally between the period 2016 -2018 and the company’s proven liquids reserves are approximately five times larger than the combined proven liquids reserves of the five major international oil companies: ExxonMobil, Shell, Chevron, Total and BP. The company’s heritage dates back to 1933 as an upstream venture founded predecessors to Chevron and ExxonMobil.

Aramco’s net refining capacity is considered, according to data provided by a third-party consultant in the industry, the fourth largest integrated refiner in the world based on a comparison with the most recently available data with a gross and net refining capacity of 4.9 million & 3.1 million barrels per day respectively as of December 2018.

Last but not the least, Aramco is a very solid, company financially generating SR453.7 billion ($121.0 billion) in net cash from operating activities and SR321.9 billion ($85.8 billion) of free cash flow as of the year ended on Dec. 31, 2018.

Also, one of the most competitive strengths and advantages of Aramco in addition to its excellent operating cash flow and free cash flow, are the strong earnings. For example, Aramco’s last year net income was $111.1 billion.

Additionally, one of the major advantages of Aramco compared to the major international oil producers, is its unique position as the lowest upstream lifting cost producer globally as of Dec. 31, 2018 averaging $2.8 per barrel of oil.

In my opinion, these strengths which Aramco possesses indeed makes its IPO and listing the world’s most historical and successful one, despite some doubts raised by international financial analysts and media, which have been proven wrong.

• Talat Zaki Hafiz is an economist and financial analyst.

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