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Aramco faces new test: shareholders

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Aramco's market debut on the Riyadh stock exchange will raise pressure for higher profit margins on a company that so far has been answerable to no one except the government.

has ramped up spending on technological innovation while its rivals cut back amid soft oil prices, but the energy giant risks losing its edge after its much-anticipated IPO.

Aramco said it incurred R&D expenses of $591-million in 2018, up from $507-million in the previous year. Workers displayed innovations, from production-boosting drilling technology to nimble robots that crawl over pipes to carry out repairs and drones fitted with “sniffers” to detect leaks and inspect flare tips.

But an expensive R&D effort may not appeal to investors as profits slip. In the first nine months of this year, Aramco said its net profit dropped 18% to $68.2-billion. “It is understandable that some in the company are concerned that there could be pressure to scale back or change its R&D strategy.” But analysts are left asking whether the IPO will be constructive for Aramco, the front engine of an economy strongly tethered to oil.group said in a report.

 

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