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ravenhawk10 t1_j8gtj3z wrote

Reply to comment by studude765 in [OC] New Mexico Now Produces More Oil Than Mexico & Venezuela by latinometrics

You say Saudi Aramco is publically traded but it’s only got a measly 1.5% traded and only from 2019. Its basically fully government owned and lines government coffers nicely every year. The whole point of the IPO was becuase the government wanted cash. To be fair they are using it for a sovereign wealth fund to diversify their revenue. Furthermore, the IPO didn’t attract much interest from western capital markets for problems commonly associated with SOEs, like corporate transparency and political risk.

It sounds more like Saudi Gov is just more competent at management than the Venezuela Gov.

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studude765 t1_j8ipv7s wrote

>You say Saudi Aramco is publically traded but it’s only got a measly 1.5% traded and only from 2019.

They still have to operate as a publicly traded company with an unbiased BOD, and have to do all the financial reporting/auditing that comes with being publicly traded.

>Its basically fully government owned and lines government coffers nicely every year.

But it's not the government making capital allocation decisions, it's the BOD and management...this is the key difference

>The whole point of the IPO was becuase the government wanted cash. To be fair they are using it for a sovereign wealth fund to diversify their revenue. Furthermore, the IPO didn’t attract much interest from western capital markets for problems commonly associated with SOEs, like corporate transparency and political risk.

Again though...the company does not take direction from the government (at least directly).

>It sounds more like Saudi Gov is just more competent at management than the Venezuela Gov.

The thing is the Venezuelan government directly controls and mandates what their oil company does as far as dividends, capital investment, etc....this is not the case with Saudi Aramco. Even with Saudi Aramco though, these companies (with large state ownership) do tend to have worse capital investment ROI and poor capital allocation over time.

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ravenhawk10 t1_j8jwt6d wrote

My point was that they have managed to operate successfully well before their IPO and associated reporting requirements. They seem to be following best practices and hiring professionals for operations. Then again, aren't these professionals essentially government employees?
Regarding the BOD, do note there are two government ministers sitting on the BOD. The BOD must retain a close relationship with the government, as the government is its only shareholder that matters. The government also has a big impact on the company's profits as its responsible for OPEC negotiations.

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studude765 t1_j8nmryx wrote

>My point was that they have managed to operate successfully well before their IPO and associated reporting requirements.

They were profitable, but were they as profitable as they could have been? Did they generate as high of an ROIC as they could have? Also the fundamental difference in Saudi Aramco and Venezuela's oil company is that Saudi Aramco is run as a business with little to no direction from the Saudi family (though they do enjoy all of the dividend benefits)...in Venezuela the government directly makes business decisions for the oil company and that has led to poor capital allocation decisions...this is also somewhat true for PEMEX as well.

>They seem to be following best practices and hiring professionals for operations. Then again, aren't these professionals essentially government employees?

Again, the company does not get directly dictated what to do by the government, as does tend to happen in Venezuela and somewhat with PEMEX as well.

>Regarding the BOD, do note there are two government ministers sitting on the BOD.

Out of how many BOD members though? with Venezuela you have pretty much 100% government control and with PEMEX still more government control than 2 BOD members.

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