Saudi Aramco's Earnings Call Will Reveal More Than the Actual Results

(Bloomberg) -- Saudi Aramco is publishing first-half financial figures on Monday, but it’s the world biggest oil producer’s earnings call that promises to be a far more revealing affair, writes Bloomberg oil strategist Julian Lee.

The big first-half trends that will have shaped the company’s earnings are well established: oil production for the first half of 2019 declined after the kingdom cut output as part of an agreement reached with other OPEC and non-OPEC countries in December to restrict supply. Saudi Arabia’s state oil producer should also have earned less for each barrel, something that’ll be seen in its bottom line.

But the conference call is a more interesting proposition. It will tell us about how the company would communicate with analysts and future investors (if an IPO is to happen). Will it follow the "Old Exxon" model of sharing very little, or the more open approach of "New Exxon" and European oil companies? We might hope for some granular detail on investment plans and decline rates at major oil fields, and the expansion of a pipeline to avoid the Strait of Hormuz.

Participants on the call could also get details on the progress of plans to expand the company’s refining capacity in Asia and the synergies that can be expected from a deal to buy a 70% stake in Saudi chemicals producer Sabic.

And then, of course, investors will be looking for clues as to what Aramco thinks about the state of the oil market. In this regard, I think we’ll be disappointed and get no more than repetition of the line usually taken by the Saudi oil minister Khalid Al Falih -- that demand for the kingdom’s crude remains strong and that it will do whatever’s necessary to prop up prices. Aramco, after all, will produce as much, or as little, as it’s told to by the oil ministry.

That’s not to suggest that there will be no interest in the financials. Potential investors will want to assess the company’s cash-flow generation and how much will be left over to pay dividends after investment, taxation and other commitments. To that end, its financial results will, of course, still be important.

To register for Saudi Aramco’s first-half results webcast, at 2 p.m. London time or 9 a.m. in New York, click here.

Note: Julian Lee is an oil strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice

To contact the reporter on this story: Julian Lee in London at jlee1627@bloomberg.net

To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net, John Deane

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