Attacks on Saudi Arabia’s oil facilities may impact Aramco’s valuation but are unlikely to derail the kingdom’s plan to sell shares in the oil giant, according to the Eurasia Group.
“Crown Prince Mohammad bin Salman will push the company to demonstrate that it can effectively tackle terrorism or war challenges,” analysts led by Ayham Kamel, head of Middle East and North Africa research at the Eurasia Group, said in a research report. “The attacks could complicate Aramco’s IPO plans given rising security risks and potential impact on its valuation.”
Saudi Arabia’s oil production was cut by half after a swarm of explosive drones struck at the heart of the kingdom’s energy industry and set the world’s biggest crude-processing plant ablaze - an attack blamed on Iran by the top US diplomat.
The attacks came as Aramco, officially known as Saudi Arabian Oil Co., is speeding up preparations for an initial public offering. The company has selected banks for the share sale and may list as soon as November, people familiar with the matter have said.
Eurasia also said:
- “The latest attack on Aramco facilities will have only a limited impact on interest in Aramco shares as the first stage of the IPO will be local. The international component of the sale would be more sensitive to geopolitical risks”
- Current valuation estimates of Aramco and its assets might not fully account for geopolitical risks.
Eurasia on oil prices:
- Scale of attack to encourage markets to re-examine the need for considering a geopolitical risk premium
- A small $2-$3 premium would emerge if the damage appears to be an issue that can be resolved quickly, and $10 if the damage to Aramco’s facilities is significant