Saudi Aramco sets stage for IPO

MOSCOW (MRC) -- Saudi Aramco unveiled a USD15 billion deal to expand its global refining footprint and held its first-ever earnings call with financial analysts, twin moves that could bolster investor confidence as the state-owned oil giant revs up plans to list shares, said WSJ.

Aramco's net income for H1 2019 was USD46.9 billion. This is actually a 12% decrease from its net income for the first half of 2018, but was expected because the price of the Brent oil benchmark has averaged $66 per barrel this year as opposed to USD69 per barrel last year. The company continues to diversify by growing its downstream sector as well as become more integrated.

Yet, the big questions concerning the strength of the company as a possible investment for outsiders remains undressed. Specifically, potential investors need to understand Aramco's relationship with the Saudi government. This was only addressed at one point during the call when an analyst asked about Aramco's dividend. According to figures provided by Aramco, the company paid USD26.4 billion to its shareholder in "Ordinary Dividends" in H1 2019. This was almost identical to the amount paid in H1 2018. However, Aramco paid another USD20 billion to Saudi Arabia in "Special Dividends." This reflects an increase of USD14 billion over last year's H1 dividend.

In answering the question, Aramco's CFO, Khalid al-Dabbagh, explained that Aramco's executives and board of directors policy regarding the Ordinary Dividend is based on three criteria: sustainability, affordability and a benchmark. According to al-Dabbagh, such a high dividend in 2019 was possible despite lower profits because Aramco made more than anticipated in 2018. However, he did not address the fact that this incomparably high dividend is given because it is needed to satisfy a significant part of Saudi Arabia's budget. Saudi Arabia, as a country, could not survive without this dividend and its royal family could not prosper.

Even more important are the implications of this dividend should Aramco go public. For example, will this type of dividend be available to the holders of publicly traded shares or will the Saudi government be the only recipient of "Special Dividends" or even the "Ordinary Dividends" from Aramco? If Aramco makes its lucrative dividend available to shareholders other than the Saudi government, then Aramco shares could prove highly valuable. On the other hand, if Aramco continues to fund the Saudi government through a dividend that is unavailable to other shareholders, then the public could very well find Aramco shares a highly unattractive prospect.
MRC

HMEL reduces run rates at Bhatinda PP unit

MOSCOW (MRC) -- Mittal Energy Limited (HMEL) has decreased production runs at Polypropylene (PP) plant owing to technical issues, said Apic-online.

A Polymerupdate source in India informed that the company has cut the production runs at the plant to around 60-70% of capacity levels in early-August, 2019. The plant is likely to operate at the same levels until the plant shuts for maintenance in last week of August 2019.

Located at Bhatinda, Punjab in India, the PP plant has a production capacity of 440,000 mt/year.

As MRC informed earlier, HPCL-Mittal Energy Ltd (HMEL) has recently received clearance from India’s ministry of environments for the polymer addition project at its Guru Gobind Singh refinery and Petrochemical complex.

Hindustan Petroleum Corporation Limited (HPCL) is an Indian state-owned oil and natural gas company with its headquarters at Mumbai, Maharashtra and with Navratna status. HPCL has about 25% marketing share in India among PSUs and a strong marketing infrastructure. The Government of India owns 51.11% shares in HPCL and others are distributed amongst financial institutes, public and other investors.
MRC

Shell Norco, Louisiana chem plant, refinery finishing overhauls

MOSCOW (MRC) -- Royal Dutch Shell Plc is restarting the Gas Olefins Unit 1 (GO 1) at its Norco, Louisiana, chemical plant on Monday, sources familiar with plant operations said, as per Reuters.

Shell plans to begin restarting the 25,000 barrels per day (bpd) coker in the adjoining 225,300 bpd Norco refinery this week, the sources said.

As MRC reported before, in March 2018, Shell EP Middle East Holdings B.V. completed the sale of the entire share capital of Shell Iraq B.V (SIBV), which held its 19.6% stake in the West Qurna 1 oil field, for USD406 million, to a subsidiary of ITOCHU Corporation.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
MRC

Kohlberg completes acquisition of Bemis Healthcare Packaging Europe

MOSCOW (MRC) -- Private equity firm Kohlberg & Co. LLC has completed the acquisition of Bemis Healthcare Packaging Europe from Amcor’s Flexible Packaging business unit, said Canplastics.

First announced in June, the deal will see the Bemis unit merged with Nelipak Corp., a global supplier of custom packaging for the medical device and pharmaceutical industries that Kohlberg acquired in July 2019.

In a statement issued at the time of sale, Australia-based Amcor said that the divestment was required by the European Commission at the time of approving Amcor’s acquisition of Bemis on 11 February 2019.

Bemis Healthcare Packaging operates facilities in Clara, Ireland; Derry, Northern Ireland, UK; and Elsham, UK.

Mount Kisco, N.Y.-based Kohlberg reportedly paid USD394 million for the three plants, which collectively generate annual sales of approximately USD170 million supplying flexible packaging to healthcare OEMs.

“We are excited about the addition of the Bemis European Healthcare Packaging business,” said Mike Kelly, president and CEO of Nelipak, said in a statement. “We will leverage the unique capabilities of both organizations to delight our customers with innovative designs, world-class quality and excellent service. This will significantly enhance Nelipak’s capabilities with the addition of flexible packaging alternatives for our global customers."
MRC

Mexican regulator approves Pemex oil refinery construction, with environmental conditions

MOSCOW (MRC) -- The environmental regulator for Mexico’s oil industry said on Monday it had approved the construction of a refinery for state oil company Pemex, but imposed conditions to mitigate the environmental impact of the USD8 billion project, said Reuters.

Mexican President Andres Manuel Lopez Obrador has said the facility planned for the Gulf Coast port of Dos Bocas in his home state of Tabasco would help Mexico wean itself off its growing reliance on fuel imports, one of his signature campaign pledges.

Environmental regulator ASEA approved the project after reviewing a report prepared by Pemex that offered a mostly positive environmental assessment of the refinery’s construction despite predicting a “severe” impact on air quality.

ASEA said Pemex, while building the project, must monitor local water quality, rescue and relocate affected wildlife and protect a mangrove forest, among other mitigation measures.

Slated for completion by 2022, the refinery is expected to process up to 340,000 barrels per day of heavy crude oil.

Lopez Obrador tapped the oil company to oversee the project after deeming bids from engineering groups were too expensive, putting more pressure on Pemex, the world’s most indebted oil company that has struggled to reverse declining output.

However, the project has been repeatedly criticized by investors and ratings agencies due to concerns it will divert funds away from Pemex’s more profitable exploration and production business.

Ratings agency Moody’s has said the new refinery could exceed the budget by USD2 billion to USD4 billion due to the government’s “limited know-how” on such projects.
MRC