Comprehensive Energy Data Intelligence
Information About Energy Companies, Their Assets, Market Deals, Industry Documents and More...
The End of Easy Oil Money for Saudi Arabia?
02/24/2024
- Saudi Arabia's spending at home and abroad has led to a significant reduction in its sovereign wealth fund.
- The Public Investment Fund's assets decreased from over $105 billion in 2022 to about $37 billion by September.
- This reduction in assets is likely linked to Saudi Arabia's decision to cancel an oil production capacity expansion earlier this month.
Last year, Saudi Arabia's sovereign wealth fund spent more than any other country in the world, making up a quarter of the $124 billion total spent by such funds globally. The kingdom has been pouring money into huge projects both inside and outside its borders, including the ambitious $500-billion Neom City and launching a new airline.
Due to this massive spending spree, the Public Investment Fund saw its cash and assets decrease from over $105 billion in 2022 to around $37 billion by September, as the Wall Street Journal reported. With oil prices hovering around $80 per barrel, financing these large-scale projects is becoming more difficult.
Saudi Arabia has been working hard to maintain high oil prices to fund Vision 2030, Crown Prince Mohammed's initiative to diversify the economy beyond oil. However, the kingdom is finding it challenging to balance this ambitious plan with the realities of its oil-dependent economy.
The drop in the sovereign wealth fund's assets might be a reason Saudi Arabia recently decided not to go through with expanding its oil production capacity. Energy Minister Abdulaziz bin Salman mentioned shifting investments within Aramco and focusing more on transitioning to renewable energy as reasons for this change.
Abdulaziz bin Salman pointed out that current production limits provide a safety net of about 3 million barrels per day in spare capacity, should there be a sudden tightening in supply. However, it's uncertain if Saudi Arabia would utilize this buffer in the event of a supply disruption, especially considering the country's extensive investment in projects costing over a trillion dollars.
Aramco recently shared a stark update on the state of global oil production, noting a significant drop. The company's CFO highlighted a yearly loss of 6 million BOE/D due to natural declines and insufficient efforts to find new reserves. This drop has led to a severe cut in the spare production capacity to just 3% of worldwide demand.
The Saudi energy giant has long cautioned that without more investment in exploration and future oil production, the industry faces a critical situation. This concern is especially pressing if OPEC's demand forecasts prove more accurate than those of the IEA.
This potential crisis could benefit Saudi Arabia by driving up oil prices to levels that would support the kingdom's ambitious plans to diversify its economy beyond oil. The big question remains: how long will Saudi Arabia need to wait for this shift, and what steps will it take in the interim? Currently, it's turning to the debt markets for solutions.
In the past year, the Public Investment Fund has gone to market twice, issuing a $5.5 billion bond, including a green bond, and a $3.5 billion dollar-denominated sukuk. Additionally, Saudi Arabia raised $12 billion in January this year through bonds, attracting $30 billion in orders due to high demand.
Aramco itself is looking to issue more debt, with plans for longer maturity bonds and even considering selling more stock, as mentioned by CFO Ziad Al-Murshed.
As the kingdom eyes lower interest rates, the attractiveness of borrowing grows, signaling more debt issuances may be on the horizon.
Moreover, the potential for higher oil prices (by expectations of slower U.S. production growth) adds another layer to the financial strategy. This slowdown could mean more centralized control over shale production.
Saudi Arabia is not short on ambition, with plans to venture into electric vehicle manufacturing, establish a new e-sports and video game industry, and significantly invest in local soccer. Realizing these grand visions will require substantial financial resources, and the kingdom appears ready to leverage every available option to make these dreams a reality.
If you are looking for more information about energy companies, their assets, and energy deals, please, contact our sales office mapping@hartenergy.com, Tel. 619-349-4970 or SCHEDULE A DEMO to learn how Rextag can help you leverage energy data for your business.
TotalEnergies $5.7B Profit, U.S. Rig Count Loose and Crude Oil April Update
TotalEnergies kicked off 2024 with a net income of $5.7 billion in the first quarter, marking a modest 3% increase from the same period last year and a 13% rise from the previous quarter. This growth occurred despite experiencing drops in both the volume and price of gas sales over the year and the quarter. Their adjusted net earnings, which exclude one-time or unusual items, were $5.1 billion. This represents a significant 22% decline compared to last year and a slight 2% drop from the last quarter. The company's earnings before tax, depreciation, and amortization reached $11.5 billion, while their cash flow from operations significantly decreased to $2.2 billion, falling by 58% from last year and a steep 87% from the previous quarter. TotalEnergies also recorded $644 million in impairments.
Civitas Resources Advances with Midland Assets in a $2.1 Billion Agreement
Denver-rooted Civitas Resources, Inc. concluded an arrangement to acquire Vencer Energy's assets in the Midland Basin from Vitol for an approximate $2.1 billion. The $2.1 billion arrangement between Civitas Resources and Vencer Energy is a strategic maneuver that enlarges Civitas' presence in the resource-rich Permian Basin. By securing approximately 44,000 net acres, Civitas not only acquires a substantial asset but also amplifies its production capacity by 62 to 62.5 Mboe/d. The transaction, which is anticipated to complete in January, is perceived as a cost-effective acquisition that markedly enhances Civitas Resources’ scale in the Permian Basin.
OXY has been the leader in Permian Basin production for the past five years. Currently, the Houston-based oil and gas company is deepening its presence in the basin with a $12 billion acquisition of CrownRock, adding over 94,000 acres in the Midland Basin and increasing its oil output by about 170,000 barrels per day. Occidental announced an increase in its proved reserves to 4.0 billion barrels of oil equivalent by the end of December 2023, up from 3.8 billion the previous year. Activities in the Permian largely fueled this rise. Occidental added approximately 303 million barrels through infill development projects as well as new discoveries and the further development of existing fields brought in another 153 million barrels.
TotalEnergies kicked off 2024 with a net income of $5.7 billion in the first quarter, marking a modest 3% increase from the same period last year and a 13% rise from the previous quarter. This growth occurred despite experiencing drops in both the volume and price of gas sales over the year and the quarter. Their adjusted net earnings, which exclude one-time or unusual items, were $5.1 billion. This represents a significant 22% decline compared to last year and a slight 2% drop from the last quarter. The company's earnings before tax, depreciation, and amortization reached $11.5 billion, while their cash flow from operations significantly decreased to $2.2 billion, falling by 58% from last year and a steep 87% from the previous quarter. TotalEnergies also recorded $644 million in impairments.
New Mexico leads the Rockies region in gas production and ranks as the sixth-largest in terms of active gas wells in the U.S. Last year, the state's gas well count slightly increased by 0.2% to 30,699, with new additions in both the northwestern San Juan Basin and the southeastern Permian Basin. Meanwhile, just to the north in Colorado, gas producers grew by a modest 0.1% to 30,322, primarily due to increased drilling activity in the DJ and Piceance basins. Wyoming saw a decline in its active gas wells by 3.7%, down to 17,006, with production mainly in Sublette, Sweetwater, and Converse counties reflecting stable or slightly reduced drilling activity. Utah also experienced a slight decrease of 0.2% in its number of gas wells, totaling 6,463. In Q1 2024, oil and gas industry activity in Oklahoma, Colorado, and northern New Mexico experienced a decline. This marks the fifth consecutive quarter of contraction in drilling and business activities within these regions. According to a survey that included responses from 33 firms operating in the Rockies, this downtrend is expected to continue over the next six months.