Investors on the edge who attack highlight Aramco IPO risk
This weekend's attack on key oil infrastructure in Saudi Arabia has investors anxious because the kingdom has just accelerated its plans to list Saudi Aramco in what will ever be the world's first public offering (IPO).
Despite world-class assets and the fact that Saudi Aramco pumped in at just under 10 million bpd before the attacks – or more than the world's top four listed oil companies combined – analysts and investors tell Bloomberg that the valuation of the company does not fully account for major supply disruptions like the current one.
"They are the best assets in the world, but I have no interest in owning Aramco given the security risk," Ben Cleary, chief executive of Asia at Tribeca Investment Partners Pty, told Bloomberg, noting that the geopolitical risk in Persian Gulf and the risk of multiple attacks on critical Saudi oil infrastructure will not disappear anytime soon.
On Saturday, the Abqaiq plant and Khurais oil field in Saudi Arabia were hit by attacks, resulting in the suspension of more than half of Saudi Arabia's oil production.
Terrorist attacks on projectiles resulted in suspension of production of 5.7 million barrels of crude oil per day, Saudi Aramco said on Saturday, confirming the loss of more than half of the kingdom's oil production.
prices shot up Monday after markets reopened after the attacks, while analysts say price movements over the next few days will be determined by how quickly and how much oil production Ara mco can recover.
According to analysts, the longer the timeline for Aramco to restore crude oil production, the more bullish it will be for the oil price. Ironically, Saudi Arabia needs around $ 80 per barrel of Brent Crude to balance the budget and a fairly high oil price to get as high a value for Aramco in the IPO as it can.
By Tsvetana Paraskova for Oilprice.com
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