What's Saudi Aramco worth?

Why we think this oil giant is overvalued

Allen Good, CFA 11 December, 2019 | 1:23AM

Saudi Aramco

Saudi Aramco, Saudi Arabia’s state-owned oil company, began trading on the Riyadh stock exchange today. Exclusive rights to produce from nearly all the oil and natural gas reservoirs in the Kingdom of Saudi Arabia gives Aramco access to some of the lowest-cost oil and natural gas reserves globally, bestowing it with an overwhelming cost advantage and earning it a wide moat and stable trend rating, in our view. Our discounted cash flow model values Aramco at US$1.4 trillion, or SAR 26 per share, implying a yield of 5.4%, below the initial offer price of US$1.7 trillion, or SAR 32 per share.

Saudi Aramco has no close peers, given its size, structure, and cost advantage. With hydrocarbon production of 13.6 million barrels of oil equivalent per day in 2018, 10.3 mmboe/d of which was crude oil, it dwarfs every other public oil and gas company, even including peer national oil companies--those that are largely government owned and typically have preferential access to their country’s resources. Only Russian gas giant Gazprom comes close, but it lacks the oil production.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

About Author

Allen Good, CFA

Allen Good, CFA  Allen Good, CFA, is an energy strategist for Morningstar.

© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies