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Comment by aerodog | Hacker News Reader

Can someone explain to me how the sale of 5% of Aramco will yield $2T? Certainly they don't believe Aramco is worth $40T?

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Wikipedia says there are an estimated 268 billion barrels in Saudi Aramco's proven oil reserves, with maybe 90 billion more undiscovered. It produces somewhere between 3 and 4 billion barrels annually. If a barrel of oil is worth about $50, then the total value of Aramco is about $18 trillion. We can put a discount on that for time, but you might also want to consider that oil will get more difficult to pump out of the ground and price should increase faster than inflation. CPI is pegged to the price of oil, so all this stuff gets complicated.

You need to measure how much profit they'll make from the oil, not the revenue it will generate.

SA has the highest profit margin of any oil exporter.

Still, he's got a point. They are very mysterious about what their margins are.

Mind you, that estimate has remained unchanged since the late 80s, even though about 100 billion barrels have been extracted since then. OPEC quotas are based on a country's reserves. Take with a lot of salt.

The problem with that valuation is the fact that the IPO shares won't have any rights to the oil reserves. The devil is in the details. I'm sure most people buying stock think that they're buying part of SA's riches, but you're really only buying into the poorly run service company that extracts it.

Here's some interesting info...

"Based simply on its oil reserves and using a conservative valuation of roughly $10 per barrel, Aramco could be worth more than $2.5 trillion." [0]

Then:

- $45/barrel (current price) --> roughly $11.25 trillion

- $100/barrel --> $22.5 trillion

etc

Thing is, where will the barrel price go? Any major or minor [1] event can move the price up or down.

[0] http://www.bloomberg.com/news/articles/2016-01-07/too-big-to...

[1] http://www.telegraph.co.uk/finance/newsbysector/energy/oilan...

The Aramco IPO doesn't include any reserves. Those remain 100% sovereign. You're just buying into the services company.

Thanks for downvoting something 100% true? It's trivial to Google the source, but here you are. Straight from the CEO's mouth to print. http://www.wsj.com/articles/potential-saudi-aramco-ipo-wont-...

What's odd is that they are talking about selling the stake when oil prices are near record lows. The other worrying point is that if Saudi is selling their oil production, why on earth would you want to be a buyer?

Planet Money says they are estimated to be worth $4T total [1]

[1] http://www.npr.org/sections/money/2016/02/03/465476188/episo...

Their sovereign wealth fund is currently sitting at $700M. The Aramco IPO will hardly be the only contributor on the way to $2T.

Aramco represents more than half of Saudi Arabia's GDP, and at best they should be able to net $0.5T by selling 5%.

How do they find another $1.5T? $700M is 0.05% of that.

This is either a typo or an English-American collision. The SA wealth fund is sitting on 0.7 trillion dollars.

Typo in the parent - their Sovereign Wealth fund has assets of ~$700 billion. Though they've been using it heavily to prop up state spending with the collapse in the oil price and war in Yemen.

interesting read about that http://www.bloomberg.com/news/articles/2016-01-07/too-big-to...

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