Page 5 - MEOG Week 45
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MEOG Commentary MEOG
credit terms to borrowers willing to participate in the offering. the proceeds of the Aramco IPO are thought to be the cornerstone of Crown Prince Mohamed Bin Salman’s (MBS) economic diversification strategy for the kingdom’s econ- omy away from its oil dependency.
The final offer price will be announced, as will the number of shares to be sold on December 5, following the book-building period.
Investor attention will no doubt have been attracted by a short line on page 71 of the doc- ument, which notes the government’s reduction to 15% of the state’s “royalty rate on crude oil and condensate production (from 20%) on Brent pricesupto$70perbarrel”.
Points of interest
Aramco said that it intended to achieve its vision of becoming “the world’s pre-eminent inte- grated energy and chemicals company, operat- ing in a safe, sustainable and reliable manner” by maintaining “its position as the world’s leading crude oil producer by production volume and the lowest cost producer, while providing reli- able, low-carbon intensity crude oil supply to customers”.
A point of great interest, and jealousy among competitors, is just how well it has managed depletion across its vast upstream asset base.
Aramco said that most of its fields had been producing for “many decades at low depletion rates of 1% to 2% per year relative to estimated ultimate recovery”, noting that as of December 31, 2018, “more than 80% of the Kingdom’s proved crude oil reserves were in reservoirs that were less than 40% depleted”.
Giving an idea of the quality of reserves, Ara- mco said that the “main recovery mechanism”for its oil reserves was “peripheral water injection”
to maintain “reservoir pressure, maximise res- ervoir sweep and minimise water produced over time”.
It admitted that in some fields it needed to re-inject produced gas into gas caps, but consid- ering the widespread use elsewhere of tertiary recovery methods, it is somewhat incredible, if true, that Aramco has been able to produce the levels it has for so long without employing these techniques.
Meanwhile, despite a downturn in financial performance over the past half year, Aramco is in rude financial health. Of the September attacks
at facilities in Abqaiq and Khurais, Aramco said: “The company does not expect the impact of these attacks to have a material impact on its business, financial condition or results of opera- tions,” illustrating the firm’s strength in depth.
Week 45 13•November•2019 w w w . N E W S B A S E . c o m P5
