Oil companies aren’t valued by their reserves

Snippa:

And it matters because this is oil, and we all know that the world’s oil reserves cannot be burned or, quite literally, there is no future for life on earth. And yet this flotation assumes we can: the value is in the reserves.

No.

It is one of the largest companies in the world by revenue, and according to accounts seen by Bloomberg News, the most profitable company in the world.[7] Saudi Aramco has both the world’s second-largest proven crude oil reserves, at more than 270 billion barrels (4.3×1010 m3),[8] and second-largest daily oil production.[9]

Saudi officials have backed an official figure of $2 trillion for Saudi Aramco’s value. The company’s financial data were leaked in April 2018, and according to Bloomberg’s analysts the company could be valued at $1.2 trillion, a significantly lower sum.[10]

If we take the Saudi number that values each barrel of reserve at $7.50. Current Brent is around $62.00.

So, we’re not valuing Aramco at the value of reserves, are we?

On Wednesday, 12 June 2019, Aramco has reported its net income at $111.1 billion in 2018 compared to $75.9 billion in 2017, this with total revenues at $355.9 billion in 2018.[15] By first half of 2019, Aramco reported a net income of $46.9 billion.[16]

Hmm. $50 billion in profits for a half year. So, mebbe $100 billion for a full. That’s a 5% return on $2 trillion valuation, isn’t it?

You know, we might be valuing Aramco on the profits it makes, not reserves.

Gosh, you mean the professor emeritus of practice in international political economy at Islington Technical College knows fuck all? We are surprised.

Never was there a more obvious conflict between the failing logic of the market and future we need.

We might perhaps worry more about the gap between knowledge and commentary……

13 comments on “Oil companies aren’t valued by their reserves

  1. The Stone Age didn’t end because we ran out of rocks. They patiently wait for our return.

    It’s the ‘future we need.’

  2. and we all know that the world’s oil reserves cannot be burned or, quite literally, there is no future for life on earth

    Who the fuck is this ‘we’ that all knows? It doesn’t include me, that’s for sure.

  3. Is it not the case that all the fossil fuel reserves of the Earth are waaay less old than the Earth? Most coal was laid down in the Carboniferous period which is 300-350m years ago. At a point when there was abundant life on Earth, otherwise there would have been all those plants to die and be turned into coal. And oil is even younger, about 200m years old. So my logic says that all the CO2 currently locked up in coal and oil/gas was once in the Earth’s atmosphere and the Earth was just fine. It didn’t enter a death spiral and become another Venus or Mercury. So if we burned every last drop of fossil fuel on the planet we’d only be putting it back to the same state it was in 400m years ago.

    Crisis averted!

  4. In earlier geological epochs, atmospheric CO2 concentrations were at least an order of magnitude higher than today. It’s true that there were crocodiles swimming at the poles and sea levels were generally a lot higher, but there was no catastrophic runaway.

    Interestingly (perhaps), oxygen levels can’t vary very much – if PP(O2) gets a few percent higher than today, natural wild fires burn out of control, converting the O2 to CO2.

  5. Atmospheric Carbon is around 120 ppm.
    ( based on C making up 12/44ths of CO2 by mass ) and atmospheric CO2 being around 400ppm.
    Carbon in whole of the earth is estimated at 1.85 * 10 (power 21) kg from
    https://phys.org/news/2019-10-scientists-quantify-global-volcanic-co2.html
    Mass of the earth is estimated at 6 * 10 (power 24) kg from school text books
    So all earth Carbon is around 310ppm.

    Wow, atmospheric C is about 2.5* too low compared to the planet as a whole. If we want it to be in balance of course.

  6. Yes, the nut-job eco-freaks have taken –

    Most climate scientists agree something is happening to the climate

    stretched that to;

    This will be catastrophic

    And added

    If we don’t do something dramatic in the next two weeks the catastrophe is unavoidable.

    And still tack on ‘most scientists agree’ to their final conclusion.

  7. And of course, Murphy has added – I have the answer to all this, give me a grant and I will write a report about it.

  8. This talk of oil reserves reminds me of something that came to mind recently.

    In the ’70s watermelons were gleefully predicting peak oil and that we were all going to have to stop using our cars etc and pushing forward their state controlled solutions to the problem.

    When it became obvious that we had more oil reserves than we knew what to do with they suddenly discover global warming and are now gleefully telling us that were all going to have to stop using our cars etc and pushing forward their state controlled solutions to the problem.

  9. I response to Trump questioning the California approach to forest management the BBC article says (as if it was an absolute fact) that due to global warming wildfires will happen almost every year now in California.
    Completely ignoring the fact that wildfires have always happened every year, it’s the scale of them and location near to human habitation that’s the issue.
    British Columbia had the same when we had 2 years of bad wildfires, this will be the new norm now etc. Funnily enough last 2 years have been wildfires have much less of an issue .

  10. And whatever happens, the Saudi state still owns the reserves, Aramco merely own the right to extract it.

  11. BinD: They’re preparing the ground to abandon Climate Change ARGH!!! We Must Be In Control and progress onto Inequality ARRRGHHH!!!! We Must Be In Control! I’m not sure what will be next but it probably includes People Have Unique Identities, ARRRGHHHHHHHHH!!!!! etc.

  12. @Jim November 4, 2019 at 1:32 pm

    I enjoy using that logic on Greens; similar to pointing out to vegans “no beef eaters & milk drinkers = no cows in fields”

    Usually results in “Um, err, yeah but, no but…”

    .
    Citadel Drilling and Encana [Oil] joins energy exodus out of Trudeau’s Canada into Trump’s America

  13. @BniC November 4, 2019 at 5:31 pm

    “BBC says that due to global warming wildfires will happen more often”

    Why? If CO2 levels are “dangerously high” fires should be less likely.

    Why? Temperatures are nowhere near spontaneous combustion levels

    Why? Temperatures are much lower than Cali in BC, Finland, UK yet wildfires there

    BBC/Greens report beliefs as Facts, but don’t provide evidence of cause being AGW

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