2-22-17 Keen Perspective: Macro Energy Trends

From our Mid-Atlantic Energy Analyst Friend:

One of the best items we have read in recent times is linked below. It is a great history from Roman times of how monetary policy is really in place to serve the government, not the people We urge you to read it. We learned more from this presentation than any one item in a long time.

https://mises.org/library/inflation-and-fall-roman-empire

Finally, an update on the progress of the Aramco IPO, just since our note yesterday. We see the IPO as quite probably the largest single occurrence to affect the energy markets in the next several years. We promise not to dwell upon it, but we plan to follow its major milestones closely

https://www.wsj.com/articles/saudi-aramco-picks-j-p-morgan-hsbc-morgan-stanley-as-lead-ipo-underwriters-1487720329

Saudi Aramco Picks J.P. Morgan, HSBC, Morgan Stanley as Lead IPO Underwriters

Much of the money raised would go to country’s sovereign-wealth fund to diversify economy through investments

Summer Said and

Ben Dummett

Feb. 21, 2017 6:38 p.m. ET

Saudi Arabia’s state-owned energy company has told J.P. Morgan, HSBC and Morgan Stanley they will be the lead underwriters for its planned initial public offering, set to be the largest ever, according to people familiar with the matter.

The three banks will lead the giant offering of about as much as 5% of Saudi Arabian Oil Co., known as Saudi Aramco, the people said.

The three banks declined to comment. A spokesperson for Aramco said the firm doesn’t comment on rumor or speculation.

Analysts say the stake being offered could fetch as much at $100 billion to $150 billion and Saudi Arabian Deputy Crown Prince Mohammed bin Salman has estimated that the entire company is valued over $2 trillion.

Much of the money raised by the IPO would go to the country’s sovereign-wealth fund, which would use it to diversify the kingdom’s economy through investments. The Financial Times recently reported the three were favorites to win lead roles on the deal.

The IPO’s massive size and its importance as part of Saudi Arabia’s National Transformation Plan to modernize the kingdom’s economy and wean it off oil has pushed banks to try to win a coveted underwriter role. That competition is expected to force underwriters to accept sharply lower fees, though they still stand to gain from a bonanza of fees because of the offering’s magnitude.

Participation in a successful IPO also has longer-term implications for the banks by positioning them to win additional, future business as the Middle Eastern country continues to seek advice on reshaping its economy.

Prince Mohammed has said the listing would occur in 2018. But complications restructuring Aramco and disentangling its finances from the government could delay the IPO until 2019, The Wall Street Journal reported last week.

Aramco says it managed over 260 billion barrels of oil reserves for the Saudi kingdom and pumps almost 10 million barrels a day—far more than private-sector competitors such asExxon Mobil Corp.

With the three main underwriters lined up, the next challenge will be to fill out the rest of the underwriting syndicate. Aramco and its advisers also need to select an exchange to list its shares following the new issue.

Aramco is leaning toward listing its giant, state-run oil company on the New York, London or Toronto exchanges and has soured on the prospect of floating shares of the firm on an Asian stock exchange, people familiar with the matter said, The Wall Street Journal reported this week.

About the Author: wpnorthern

Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska, a Commissioner Emeritus of NARUC, NARUC's Official Representative to IOGCC and Vice Chairman of NARUC's Gas Committee. He served as Gas Committee Chairman of the Western Conference of Public Service Commissioners. He also served as commissioner of the Anchorage Bicentennial Commission and the Anchorage Heritage Land Bank Commission. He earned a Bachelor of Arts Degree: English, at Colorado State University, a Master of Science Degree: Communications-Journalism at Murray State University and graduated from Utility Regulatory School for Commissioners at Michigan State University. He served as a Vice President for Communications and Public Affairs at Alaska Pacific University, taught bank marketing classes at the University of Alaska and was an English teacher at Los Alamos High School. Harbour served in ranks of Private - Captain during a 4-year assignment with the Army in Korea, Idaho, Georgia and Fort Meade and received the Meritorious Service Medal among other commendations. Harbour is also a past Chairman of the Alaska Council on Economic Education, the Alaska Oil & Gas Association Government Affairs Committee, the Anchorage Chamber of Commerce, the Export Council of Alaska and the Department of Commerce's District Export Council. He is a past President of the Alaska Press Club, American Bald Eagle Foundation, Consumer Energy Alliance-Alaska and Common Sense for Alaska. Harbour was instrumental in founding the American Bald Eagle Research Institute (UAS), the Alaska Support Industry Alliance, the Downtown Anchorage Business Partnership, and Arctic Power. He also served as CEO of several small Alaska organizations, including the Anchorage Parking Authority and Action Security, Inc. Harbour is also Chairman Emeritus of the Alaska Oil & Gas Congress. Harbour's wife, Nancy, is a professional, performing arts administrator and his three boys, Todd, Benjamin and William work in the fields of environmental management, energy marketing and medicine.