Long-term exclusive commitment... Saudi Arabia has historically been a one company Kingdom. That's Saudi Aramco, the state-owned oil giant. And as a privately-owned company, Aramco's financials enjoyed secret status. But now that it'll participate in public markets for the 1st time, we get a look at its (gigantic) numbers.
$15B to spare?... That's all Aramco's asking to borrow. To convince investors it's good for the money, it's showing off its profits. And they're extremely connected to whatever oil prices are doing:
- In 2016, profits for Aramco were $13B. That's when the average price of oil hit a 13-year low of $38 per barrel.
- By 2018, profits had surged to $111B thanks partly to oil prices returning to $58 — Aramco's profit was more than Apple, Alphabet, JPMorgan Chase, and Exxon Mobil's. Combined.
- Despite the extreme profitability, Aramco didn't get a perfect credit rating ("A1" = good, but lower than less-profitable American oil companies). Blame the bigger political risk in the region.
This may shake the oil habit... Aramco's profits fund 70% of Saudi Arabia's national budget. That worries Crown Prince Mohammed bin Salman, as car giants and nations go electric. The $15B that Aramco's borrowing will give the Prince money to invest in economy-diversifying anything (he's got a thing for US tech and movie theaters).