Today, Sunday, the Saudi government said that Crown Prince Mohammed bin Salman has transferred 4% of Aramco's shares to the Public Investment Fund, the kingdom's sovereign wealth fund.
The Crown Prince - Chairman of the Board of Directors of the Public Investment Fund - said that the shares transferred to the Public Investment Fund, which are worth about $80 billion, will "contribute to strengthening the fund's strong financial position and its high credit rating in the medium term."
He added that the state is still the largest shareholder in Saudi Aramco after the transfer process, as it owns more than 94% of the company's total shares.
The Crown Prince said that the transfer of these shares contributes to supporting the fund's plans to raise the volume of its assets under management to about 4 trillion Saudi riyals ($1.07 trillion) by the end of 2025.
And Reuters news agency quoted Monica Malik, chief economist at Abu Dhabi Commercial Bank, as saying, "This transaction supports expectations for the Public Investment Fund to raise funds internationally, including bonds, and could support the further sale of Aramco shares in the future."
Saudi Aramco said in its statement, "This transfer process is a private process between the state and the fund, and the company is not a party to it, and it has not entered into any agreements regarding it, and the company does not entail any payments or returns resulting from the transfer process," adding that this step will not affect The total number of shares of the issuing company, and that the shares transferred are ordinary shares similar to the shares of the other ordinary company.
"There will be no impact on the company's business, strategy, dividend policy, or governance system," she added.
Saudi officials have previously raised the possibility of selling Aramco shares, and the Public Investment Fund has not commented.
Fund governor Yasir al-Rumayyan said last year that Saudi Aramco might consider selling more shares if market conditions were right, while the Wall Street Journal recently reported that the kingdom might aim to sell a stake worth up to 50 billion. dollar.
Aramco, the world's largest oil company, completed the world's largest initial public offering in late 2019, raising $29.4 billion.
The proceeds from that offering have been transferred to the Public Investment Fund, and Aramco shares are up just over 4% so far this year.
Since Prince Mohammed bin Salman assumed the position of Crown Prince in 2017, the Kingdom has been trying to diversify its economy by supporting the entertainment, sports, tourism and other sectors, with the aim of stopping the historical dependence on oil. These efforts are led by the Public Investment Fund, which has a total assets of $480 billion.
Increase the fund's income
Mazen Al-Sudairi, head of research at Al-Rajhi Capital, told AFP that the decision increases the fund's assets by 16%.
He explained that it helps the fund, as it increases the financial flows of Aramco's distributions and gives the fund flexibility if it wants to allocate part of Aramco's shares in the local or foreign market.
He explained that Saudi oil income this year is expected to rise to about 680 billion riyals, and a surplus of 125 billion riyals over the average price of $80 per barrel, which will reflect positively on the investment fund.
After its profits declined in 2020 due to the drop in oil prices due to the Corona virus, Aramco announced last October that its profits recorded an increase of 158% in the third quarter of 2021 compared to the same period the previous year, exceeding the profits of the same period before the onset of the pandemic. The rise in oil prices and the increase in its sales occurred with the recovery of global energy demand.
The company said - in a statement on its website - that Saudi Aramco's net income amounted to 114.1 billion Saudi riyals ($30.4 billion) in the third quarter of this year, compared to 44.2 billion Saudi riyals ($11.8 billion) in the third quarter of 2020.
The company had achieved net profits in the third quarter of 2019 before the outbreak of the pandemic, which amounted to $21.3 billion.
The value of the company is estimated at about $ 1.99 trillion, and it comes in third place after "Apple", the most valuable company in the world, and Microsoft (Microsoft).
After the sharp decline in energy prices in the early days of the outbreak of the Corona pandemic, the demand for oil is approaching pre-pandemic levels, as Brent crude is trading around $ 94 a barrel, amid fears of tight global supplies.