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    2222   SA14TG012N13

SAUDI ARABIAN OIL COMPANY

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Saudi Aramco shares dive, Gulf debt markets hit as oil drops

03/09/2020 | 08:32am EDT
Trading information is displayed on the screens at the Saudi Stock Exchange, in Riyadh

Saudi Aramco shares fell by as much as 10% on Monday, dropping below their December listing price after Saudi Arabia and Russia said they would raise oil production in a battle for market share, sending crude prices down by a third.

Government bonds from Saudi Arabia and other Gulf oil producing countries were also pummeled after the collapse of the deal between OPEC, Russia and other oil producers that had propped up oil prices since 2016.

Aramco shares fell below their 32 riyals initial public offering price on Sunday for the first time since trading began in December. The Aramco listing was considered the culmination of Crown Prince Mohammed bin Salman's efforts to diversify the Saudi economy. The December IPO valued the company at $1.7 trillion in the world's biggest share offering.

Since then oil prices and oil companies' shares have come under pressure from fears over the impact of the coronavirus on oil demand and Russia's refusal to support deeper output cuts to bolster prices. As a result, the Organization of the Petroleum Exporting Countries has removed all limits on its own production.

Aramco shares closed at 28.35 riyals ($7.55), 11.4% below its IPO price. The shares closed 5.5% lower.

Benchmark Brent crude fell by up to a third on Monday after Saudi Arabia, the world's lowest cost producer, said it would increase output to gain market share.

"The Saudi reaction to the breakdown (with Russia) was to revert to the 2014 playbook. By precipitating an oil price collapse, they are looking to end their subsidy of higher cost producers," Akber Khan, head of asset management at Al Rayan Investment, said.

"This is a painful strategy that requires time to play out and failed on the previous attempt."

Arqaam Capital cut its Aramco rating to "hold" on Monday, citing the company's exposure to the oil price cut and the impact on its 2020 earnings. It also lowered its target price to 30.80 riyals a share from a previous 39.20 riyals.

Saudi stocks also fell by 7.8%, while international bonds issued by Saudi Arabia, Aramco and other Gulf sovereigns also sank.

DEBT MARKET TURMOIL

The cost of insuring against a potential debt default by Saudi Arabia also spiked by nearly 70% on Monday, IHS Markit data showed after oil prices plunged.

Aramco bonds due in 2049 were nearly 9 cents lower and the state oil giant's bonds due in 2029 fell 4.5 cents.

Saudi government bonds maturing in 2049 dropped by more than 9 cents, while 2029 bonds dropped 3.5 cents.

One-year dollar/riyal forwards, which are trades scheduled to take place a year from now, were at 85 points, up from Friday's close of 10 points. They were as high as 182.5 points on Monday, surpassing a peak of 181.3 at the end of 2018.

The bearish mood spread to other Gulf states, with Omani bonds maturing in 2048 down 7.6 cents, Abu Dhabi 2047 paper down 3.4 cents and Bahraini notes due in 2047 5 cents lower.

A regional fund manager, who asked not to be named, said it was difficult to estimate the extent of the price fall (in Gulf government bonds) following the tension between OPEC, led by Saudi Arabia, and Russia.

"(Saudi Arabia) has got reserves for the time being, but at $30 a barrel, it's going to be running a significant fiscal deficit in 2020 and going forward. It doesn't have a lot of financial flexibility in terms of adjusting its budget," he said.

If Saudi Arabia tapped the debt markets, he said it would likely pay around 60 basis points higher in interest as credit default swaps rose by that level on Monday.

(Reporting by Yousef Saba, Saeed Azhar, Davide Barbuscia and Nafisa Eltahir; Editing by Edmund Blair, Alexander Smith/Barbara Lewis/Jane Merriman)

By Yousef Saba and Saeed Azhar


ę Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
EURO / US DOLLAR (EUR/USD) -0.13% 1.18591 Delayed Quote.-2.85%
IHS MARKIT LTD. -0.23% 117.71 Delayed Quote.31.34%
LONDON BRENT OIL -0.77% 72.52 Delayed Quote.45.28%
SAUDI ARABIAN OIL COMPANY 0.00% 34.95 End-of-day quote.-0.14%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) -0.05% 72.9609 Delayed Quote.-0.99%
WTI -0.98% 70.682 Delayed Quote.52.97%
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Financials
Sales 2021 1 355 B 361 B 361 B
Net income 2021 366 B 97 648 M 97 648 M
Net Debt 2021 268 B 71 550 M 71 550 M
P/E ratio 2021 19,7x
Yield 2021 4,03%
Capitalization 6 986 B 1 863 B 1 863 B
EV / Sales 2021 5,35x
EV / Sales 2022 4,98x
Nbr of Employees 79 000
Free-Float 1,76%
Chart SAUDI ARABIAN OIL COMPANY
Duration : Period :
Saudi Arabian Oil Company Technical Analysis Chart | 2222 | SA14TG012N13 | MarketScreener
Technical analysis trends SAUDI ARABIAN OIL COMPANY
Short TermMid-TermLong Term
TrendsNeutralNeutralNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 17
Last Close Price 34,95 SAR
Average target price 35,19 SAR
Spread / Average Target 0,68%
EPS Revisions
Managers and Directors
Amin bin Hasan Al-Nasser President, CEO & Executive Director
Khalid Hashim Al-Dabbagh Director, SVP-Finance, Strategy & Development
Yasir bin Othman Al-Rumayyan Chairman
Ahmad Abdul Rahman Al-Sa'adi Senior Vice President-Technical Services
Ziad Thamer Al-Murshed Vice President-International Operations
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