On Tuesday, the story was that the Saudi Aramco IPO likely wouldn’t happen this year.
According to sources who spoke to Reuters, the offering is likely to be pushed to 2020 following the attacks on the kingdom’s oil infrastructure which crippled 50% of production capacity.
Conflicting headlines around when the Saudis will fully restore that capacity and, relatedly, how this month’s dramatic events are likely to affect the IPO, have become a fixture of the news cycle.
Fast forward to Wednesday, and guess what? Aramco is reportedly prepared to formally announce the IPO in less than a month.
Specifically, sources told Bloomberg that the company “aims to announce its intention to float around October 20 [and] the potential listing on the Saudi stock exchange could take place as early as November”.
This latest rumor came with the usual list of caveats about the timing not being final, the plans being subject to market conditions, investor demand and, presumably, no more devastating drone attacks.
That wasn’t the only Aramco rumor making the rounds on Wednesday. For good measure, Bloomberg also reported that the kingdom’s recovery from the attacks on Abqaiq and Khurais is proceeding “faster than expected”. In fact, unnamed people with “knowledge of the situation” now say Aramco has “boosted total production capacity to more than 11 million barrels a day”.
The same “knowledgable people” delved into the specifics, noting that Abqaiq is up to 4.9 million barrels and Khurais to as much as 1.3 million. Both of those figures are just shy of “normal” capacity, which is 5.5 million and 1.5 million, respectively.
Crude fell pretty sharply on the “news” (and the scare quotes are there for a reason).
To be sure, exports do seem to be rebounding. “While inherently noisy, satellite tracking of inventories suggest that they have started to draw, albeit at a smaller pace than we would expect going forward”, Goldman wrote, in a Tuesday note, adding that “the latest daily data suggests exports have normalized, which we would expect to lead to faster inventory draws”.
As noted on Tuesday, the daily deluge of competing headlines are painting an impossibly convoluted picture with regard to the time line on the Saudis fully restoring operations. Last week, Prince Abdulaziz Bin Salman gave a somewhat farcical press conference during which he proclaimed that the kingdom’s oil output had recovered to pre-attack levels, an assessment which was immediately picked apart, dissected and otherwise lampooned.
And yet, even Prince Abdulaziz admitted that full capacity of 12 million barrels wouldn’t likely be available until end-November. Bloomberg notes that “despite Aramco’s efforts to assure the market, speculation persists”.
If you ask Goldman, the market’s skepticism is warranted but likely overdone. “We find concerns understandable given the scale of the attack and the limited visibility in the reconstruction process [but] the level of Saudi Arabia’s domestic inventories and production spare capacity both suggest that maintaining export levels is achievable”, the bank wrote Tuesday.
That visual represents Goldman’s base case for recovery of the kingdom’s production and capacity.
Among other things, the bank’s analysis assumes “output is raised at unaffected fields with spare capacity”, with alternate domestic production “likely to come from heavier offshore fields”. Goldman also says they “take into account the guidance for reduced domestic refinery runs and seasonally declining direct burn of crude for power generation”.
Draw your own conclusions.