Analyzing Saudi Aramco’s Reserves: What Do They Show?



Saudi Aramco’s reserves

According to Saudi Aramco, it holds huge oil reserves of 261.1 billion barrels plus natural gas reserves of 297.6 trillion standard cubic feet. This gets translated to total reserves of 310.6 Bboe (billion barrels of oil equivalent)—assuming 6,000 cubic feet of natural gas is equal to one barrel of oil equivalent.

Saudi Aramco’ reserves are more than 10x US integrated giant ExxonMobil’s (XOM) reserves. This mind-boggling number points at the size of the super giant compared to listed integrated energy companies.

ExxonMobil, BP (BP), Chevron (CVX), and Royal Dutch Shell (RDS.A) hold reserves of around 24.8 Bboe, 17.1 Bboe, 11.2 Bboe, and 11.7 Bboe, respectively. For exposure to integrated energy sector stocks, you can consider the iShares Global Energy ETF (IXC). IXC has ~57% exposure to the sector.

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Likely value

If we roughly value Saudi Aramco’s reserves at its peer average of 11x, as discussed in The Truth behind the Major Integrated Energy Companies’ Valuations, the value of the company’s reserves should stand at ~$3.4 trillion.

Also, the huge refining and petrochemical business, discussed later in the series, would add to this. According to various media reports, considering different valuation methods, the company could be valued anywhere between $2 trillion and $10 trillion. So, even with a 5% stake, we could be looking at an IPO (initial public offering) size in the hundreds of billions of dollars approaching 2017 or 2018.

But, it isn’t clear which of the company assets will be offered to the public. The inclusion of upstream reserves will be watched for closely.

In the next part, we’ll discuss Saudi Aramco’s IPO in more detail.


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