SAUDI: Aramco H1 results build hype for a likely IPO in H2 2020, but dividend policy remains vague

GULF COUNTRIES - Report 13 Aug 2019 by Rory Fyfe and Justin Alexander

Net income was down 12% on a 4% fall in oil price and a 7% rise in opex. However, transfers to the government were up 11% to $117bn due to an unexplained special dividend. Many of the initial barriers to an IPO have diminished, and much of the groundwork has been done, so we therefore expect it to happen in late 2020 as long as oil prices are sufficiently robust. This is highly significant for Saudi and the region as it could encourage Saudi to extend OPEC cuts until the IPO is completed, inflate Aramco dividends and thereby reduce 2020 borrowing needs, and also crowd out investment in other assets.

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