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[SKEP + 229]

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Edited August 13, 2019 by SKEP

[John Foote + 1,135]

The fundamental challenge isn't the price of oil, it's how/what they spend it on. Neom is a way to toss a quick trillion down the toilet. Oil at less than $50 accelerates going broke, but even at $120 a barrel they still run out in a decade.

Iran isn't going to mess with them in a significant way. The Shia population mostly made their peace with the situation long ago, and dissidences of all kind is squashed. The Ghamdis, Rashids, Zamels, etc. are significant power structures themselves. 

Funny thing, Aramco is having it's first earnings call soon. IMHO just a pretend thing to show for a future IPO, and my internal sources believe the IPO can't happen. The biggest threats to Aramco earnings are internal, and not the ones listed so much as MBS himself.

For years the royals intentionally kept hands off the golden goose. If Aramco can somehow restructure for GAAP financials and ISO quality systems, what that would expose is not exposable. Nobody fears an IPO more than the internal power structures there. Yet the big international consulting houses are happy to continue to fleece MBS with crazy ideas knowing the structure won't support, and the biggest banks want their cut of an IPO. So it might happen, but it makes absolutely no sense. But it if doesn't, invest in the big short. A lot of money can be made in losing deals too.

[SKEP + 229]

On 8/2/2019 at 11:46 AM, John Foote said:

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Edited August 13, 2019 by SKEP

[footeab@yahoo.com + 2,192]

8 hours ago, SKEP said:

When was the last time there was stability in the Mideast ?  When is the last time there has not been conflict, war or strife ? 

Ottoman Empire prior 1914.  Sure, they were all 2nd class "citizens", but it was stable. 

[NickW + 2,714]

4 hours ago, John Foote said:

The fundamental challenge isn't the price of oil, it's how/what they spend it on. Neom is a way to toss a quick trillion down the toilet. Oil at less than $50 accelerates going broke, but even at $120 a barrel they still run out in a decade.

Iran isn't going to mess with them in a significant way. The Shia population mostly made their peace with the situation long ago, and dissidences of all kind is squashed. The Ghamdis, Rashids, Zamels, etc. are significant power structures themselves. 

Funny thing, Aramco is having it's first earnings call soon. IMHO just a pretend thing to show for a future IPO, and my internal sources believe the IPO can't happen. The biggest threats to Aramco earnings are internal, and not the ones listed so much as MBS himself.

For years the royals intentionally kept hands off the golden goose. If Aramco can somehow restructure for GAAP financials and ISO quality systems, what that would expose is not exposable. Nobody fears an IPO more than the internal power structures there. Yet the big international consulting houses are happy to continue to fleece MBS with crazy ideas knowing the structure won't support, and the biggest banks want their cut of an IPO. So it might happen, but it makes absolutely no sense. But it if doesn't, invest in the big short. A lot of money can be made in losing deals too.

My internal sources tell me the Saudisation is strong as ever with western expats (who did work) being replaced with Saudis and Muslims from allied countries who do little or no work. 

Thats going to work well when Aramco goes commercial

[Sebastian Meana + 278]

The stability of the house of Saud depends on many things more than oil, for example what happens if Iran decides to close the strait of Hormuz, or what it happens after that. MBS will not have any problem to make people he doesn't like fall on pointy sharp things. What happens if Cargo ships with food are sunken in the Indian ocean by pirates financed by other countries? Like Iran or even Japan? People tend's to get angry when they don't have as much food as they wan't.

The oil glut in 2014 didn't kill shale, that's for sure, but it did help the Saudis in another way, the technology that made Shale cheaper is helping the saudis or will help them, stuff like mutlilateral drilling, and i kinda doubt Schlumberger, Halliburton and WeatherFord, to be reluctant to help Aramco rise it's productivity per well

The Saudization plan is helping them to mantain stability, that's for sure.

Edited August 3, 2019 by Sebastian Meana

[Douglas Buckland + 6,308]

On 8/2/2019 at 6:22 PM, SKEP said:

When was the last time there was stability in the Mideast ?  When is the last time there has not been conflict, war or strife ?  

Saudi Arabia needs $85 Brent to balance budget. Remember what happened in April 2018 after royal stipends to the princes was cut back due to budget deficits.

In April 2018 there was an attempted coup at the Riyadh Royal Palace. Apparently, several princes were upset at MBS's crackdown on Saudi corruption and his jailing half of Saudi elite in the Ritz Carlton Hotel until they coughed up $Billions gained from that corruption. The King was not present at the time of coup, but MBS took a bullet. The family was moved to the summer Palace in Jeddah until things settled down.

Saudis denied the coup took place saying the gunfire was from guards shooting at a drone . .  .  .  but the numerous high profile funerals the following days indicated  otherwise.

SERIOUS QUESTION

Does the West have contingency plans for when the ineluctable $50s Brent oil price arrives ?

Talking up an IPO is just a diversionary tactic. 

IPO Prospectus 

Imagine the composition of the "Risk Factors" section of the the ARAMCO IPO Prospectus .  .  .   War . . Coup . . . Beheadings . .  .  Green New Deal. . . $50 Brent. . .  Hostile Neighbors .  .  .Dissident Shia population .  .  .    Iran Nukes . .   Visits to Saudi Turkish Embassy bodyshop  ..  Electric Vehicles .  .  . ARAMCO doesn't own oil reseves . .   

 

 

 

Why must Saudi Arabia balance their budget? Name one developed country which operates on a year-by-year balanced budget.

Saudi Arabia may hit some 'bumps in the road', but they'll get through it.

[SKEP + 229]

On 8/4/2019 at 7:34 AM, Douglas Buckland said:

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Edited August 13, 2019 by SKEP

[John Foote + 1,135]

On 8/3/2019 at 2:30 PM, Sebastian Meana said:

The Saudization plan is helping them to maintain stability, that's for sure.

Saudization and IKTVA (In Kingdom Total Value Add) is essential. But replacing a few hundred thousand high end expats isn't the issue. It's the 10 million low end worker bees. Unemployment among young Saudis s quite high. Each year the government cuts back on categories of workers who are allowed an Iqama (green card). 

But having worked as an architect of IKTVA, mishandled the program it invites types or fraud and wage inflation. There are construction and manufacturing skills that take years to develop, and just saying it will be 70% by 2030 is a hoot.  The good news is the productivity of many of the imported workers is low, so in theory in many cases a better paid, all-Saudi crew can do the job. But the transition is tough.

Make no mistake, there are many wonderful people there.

Just last week I went out with a Saudi friend of mine, who recently moved to Austin, just starting their PhD program at UT in petroleum engineering. One very sharp person, and yes, knowingly fearing adjusting to an American work ethic. 

A country like KSA can't just run a deficit indefinitely. Their currency is literally locked to the US dollar, their sales in the US dollar. IF they decouple from the dollar it would cause havoc, not to say they won't at some point. Unlike, say Iran, or Italy, they can't feed themselves. Not enough natural habitual land for the population, not even close. And for now, addicted to imported labor.