Energy empire

Drilling for billions at Aramco

Good morning, extraction experts. This is your Stock Market Rundown for March 20th, 2024. Thanks for hanging out with me today. Let’s dig in:

TODAY’S TOP STORY: PILING UP PETRO PROFITS

What’s the most profitable company in the world? You might guess Apple, Microsoft, or Walmart, but the answer isn’t a tech company or retailer. It’s a business that pulls hydrocarbon molecules out of the vast Saudi Arabian desert. 

Aramco, the world’s largest oil producer, had an eye-popping net income last year of $121 billion, putting it at the top of the global profit ranking.

The name “Aramco” is derived from the firm’s original name, “Arabian-American Oil Company”, but over the decades the Saudis bought out their American partners’ stakes. Nice trade: today, the business has a market value of $2 trillion.

The oil business in Saudi Arabia is as old as the country itself: the Kingdom was proclaimed in 1932, and the first commercial oil well struck black gold in 1938. Fast forward to today, and oil contributes over 60% of the state’s total revenues.

And that’s a problem. The Saudi government doesn’t want its entire economy dependent on volatile oil prices. It’s got a plethora of pricy projects to bolster new industries in the Kingdom, from airlines to sports to video games.

These big plans cost big money, so Aramco is poised to do a secondary offering to raise as much as $20 billion

While some western investors might worry about the Saudi government using Aramco as a piggy bank, they may be enticed by the $124 billion in dividends the business will pay out this year. It’s win-win: investors get a fat dividend yield, Saudi Arabia gets fuel for its ambitions beyond the dunes.

What do you think? Chat with me in the comments:

SO WHAT ELSE IS GOING ON?
  • Some authors are suing AI chipmaker Nvidia for training its AI platform on their copyrighted books. Plagiarism sure has evolved from when we were in 8th grade, copying and pasting Wikipedia articles for our book reports.

  • Some Wall Street analysts predict trouble for Tesla due to the global slowdown in electric-vehicle demand. CEO Elon Musk seems more concerned with getting his space rocket to reach orbit than with hitting Tesla’s sales targets.

  • “Golf cart manufacturer” may not sound as sexy as “tech startup”, but it turns out there are a lot of lazy golfers. Enough that the private-equity owners of Club Car are aiming to sell the business for $2 billion

  • A New York hedge fund manager is in trouble for allegedly helping a sketchy tech startup hide half a billion dollars. The crooked financier no-showed on his court date, claiming he was “hospitalized in a foreign country”. I’ll have to try that excuse on my boss the next time I’m hung over.

That's today's scoop, friends; see you at our usual morning slot tomorrow for another round. Yours in capitalism, The Axe

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