Saudi Aramco, the national oil company of Saudi Arabia, announced that it will hold its first investor relations call next month. Publicly traded oil companies often host investor relations calls every quarter, but Saudi Aramco is not a publicly traded oil company, and though it announced plans for an initial public offering back in 2016, it has not yet taken that step. Aramco is a private company with a single shareholder, so holding an investor relations call is curious.
Attendees walk by a sign for the Saudi Arabian Oil Co. (Aramco) on display inside the King Abdulaziz Center for World Culture during a tour of the project in Dhahran, Saudi Arabia, on Friday, Nov. 25, 2016. When completed, the project designed for
© 2016 Bloomberg Finance LP
It is unclear what Aramco intends to disclose during this call and who might be interested in participating. We can expect release of new numbers on revenue, expenses and growth. There will be some discussion on the productivity of oil fields. However, it is not even clear what the audience of this call will be interested in hearing.
Typically, equity analysts and even individual investors will call into an earnings call if they are already invested or considering investing in the company. In Aramco’s case, however, oil equities professionals no funds have the company in their portfolios. And they can’t decide to invest in it unless or until it goes public, at which time there will be ample opportunity to learn more. Therefore, there is little reason for equities investors to participate other than curiosity about this company with giant revenue. Also, since these analysts do not cover Aramco, they don’t know much about the firm or what to ask.
Aramco did issue $12 billion in bonds earlier this year, and the investor relations call could be a way to pump up the sentiment around that debt. The value of that debt dropped almost immediately after the bond issuance. Though the company has already raised the money it needs, it has an interest in keeping the value high. It may look to raise debt again in the future or it might want to do the IPO after all. In either case, it wants the value and prospects for the company to be good on the street.
Amin al-Nasser, Chief Executive of state oil company Saudi Aramco, attends the 18th International Oil Summit in Paris on April 27, 2017. / AFP PHOTO / ERIC PIERMONT (Photo credit should read ERIC PIERMONT/AFP/Getty Images)
AFP/Getty Images
The event might interest the business media looking for a story about Aramco’s IPO plans or its colossal size. However, whenever Aramco’s CEO or Saudi Arabia’s oil minister have been asked about the IPO in the past, they have refused to provide any concrete information. Moreover, the ultimate decision for an IPO is not up to the executives or the board, but the shareholder. And the shareholder will not be on the call.
When I spoke to a commodities research professional, he said he was not very interested in the earnings call from the largest oil company in the world. He explained that he could learn from news reports if the call included anything noteworthy that might impact oil pricing. In other words, from his perspective as a commodities researcher, the earnings call is nothing more than a press conference for Aramco.
Why is Aramco holding an investor relations call next month when it has only one investor? This is long term planning and a decision to take control of the narrative about the company. Aramco is a private company with the attention of a large public firm. For too long Aramco has let the media and uninformed analysts talk about it without rebuttal. This call will give Aramco a chance to set the narrative, perhaps to set the scene for a coming IPO.
