Tuesday, October 11, 2016

"In Saudi Bond Sale, Oil Value Questions"

From Barron's Emerging Markets Daily:
Saudi Arabian salesmen are pitching a bond sale Wednesday that could bring $10 billion to the struggling gulf economy that depends on oil revenue.

The bond road show starts in London Wednesday and continues next week in Boston and New York. The Wall Street Journal’s Margherita Stancati and Summer Said, along with Neanda Salvaterra, question if the Saudis’ ability to sell oil assets quickly enough to realize their value. The iShares MSCI Saudi Arabia Capped exchange-traded fund (KSA) has failed to attract investors, and is down nearly 15% this year, while The United States Oil Fund (USO) is up more than 5% and the iShares MSCI Emerging Markets ETF (EEM) is up nearly 16%.
The WSJ reporters write:
“Saudi Arabia … has warned investors it cannot accurately value its proven oil reserves that act as collateral for its fundraising scheme. In a prospectus released on Tuesday, Saudi Arabia said its proven oil reserves stood at 266.5 billion barrels at the end of 2015 and are expected to last another 70 years at the average production levels of about 10.2 million barrels seen last year....