Saudi Arabia and Russia studying new ‘working system’ for oil

There are suggestions that Russia, along with other countries, could join a restructured OPEC in the future, given weight by comments made by Crown Prince Mohammed bin Salman. (AFP)
Updated 12 June 2019
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Saudi Arabia and Russia studying new ‘working system’ for oil

  • Headed by Khalid Al-Falih and Alexander Novak, the meetings were the sixth occasion the Saudi-Russian intergovernmental committee has convened
  • The meetings come with both countries recognizing the need for closer cooperation given the volatile outlook for the global economy, trade and energy markets

DUBAI: High-level talks between policymakers from Saudi Arabia and Russia last weekend in Moscow are likely to herald cooperation across a range of economic, commercial and cultural areas — possibly including a permanent mechanism to coordinate on oil supplies.
Headed by Saudi Energy Minister Khalid Al-Falih and his Russian opposite number Alexander Novak, the meetings were the sixth occasion the Saudi-Russian intergovernmental committee on economic, trade, scientific and technical cooperation has convened.
Al-Falih said there is “no doubt that the current situation at the global level, characterized once more by fluctuations, renders Saudi-Russian cooperation even more important. For this reason, we thoroughly look into setting a permanent working system among major oil producers, for future cooperation” in the global markets.
The talks involved around 50 technocrats and advisers on the Saudi side, with a similar number of Russians.
The meetings come with both countries recognizing the need for closer cooperation given the volatile outlook for the global economy, trade and energy markets.
At the end of the talks, Al-Falih said: “These meetings were held at a time when we have had more reasons to develop cooperation and integration, to achieve the goals set by both our countries.”
They followed talks in St. Petersburg between a top-level Saudi delegation and Vladimir Putin, the Russian president, who will visit the Kingdom in October.
“We, in the Saudi-Russian joint committee, completely agree that both the Russian ‘national projects,’ and the Kingdom’s Vision 2030 present new incentives, a big boost, and wider horizons to our efforts, due to the big similarities and possibilities of integration between the plans of the two countries,” Al-Falih said.
The topics discussed in Moscow covered investments in energy, petrochemicals, military industries, logistics and telecommunications, but also spanned “softer” areas like education and training as well as tourism and culture.

 

Some analysts took Al-Falih’s reference to a “new working system” as a suggestion that Russia and other oil-producing countries could become partners in a revamped version of the Organization of the Petroleum Exporting Countries (OPEC), which has helped regulate oil flows since 1960.
Robin Mills, CEO of consultancy Qamar Energy, said: “The Russians might want it for geopolitical reasons, the Saudis might want it for oil market management.”
David Hodson, managing director of energy finance firm BluePearl Management, said: “OPEC in its current form faces big challenges. A streamlined form would make the oil market easier to manage.”
There has been speculation before that Russia and others could join a restructured OPEC, and in 2018 Crown Prince Mohammed bin Salman said the Kingdom and Moscow were working on a “10 or 20-year agreement” on oil supply.
Currently 14 OPEC members are joined by 10 non-OPEC exporters in a deal to limit supply, which could be extended at a forthcoming meeting in Vienna, though both sides are still working on the details.
Apart from the oil market cooperation between Saudi Arabia and Russia, Al-Falih pointed to recent measures in the Kingdom over capital and investment flows from Russia, to improve entry procedures for businesspeople and move to electronic visas.
“(We) would like that the Russian side offers similar facilities to Saudi citizens, whether businessmen or investors, especially for those who are currently facing difficulties in getting Russian visas, due to long waiting periods, high tariffs, and inadequate visa time validity,” he added.
He also highlighted recent moves toward greater cooperation in renewable energy. There are also deals in the supply of agricultural produce, with Saudi Arabia set to become a major importer of Russian grain.
In tourism, Al-Falih said Saudi Arabia was keen to include Russia on the list of countries that can apply for the Kingdom’s new tourist visa, and would also like to encourage more Hajj and Umrah visitors from Russia.
In culture, Saudi Arabia has been chosen as guest of honor at the 2021 St. Petersburg Cultural Forum, having sponsored a prestigious art exhibition in the city last week.

FASTFACTS

There has been speculation before that Russia and others could join a restructured OPEC, and in 2018 the Saudi Crown Prince Mohammed bin Salman said the Kingdom and Moscow were working on a “10 or 20-year agreement” on oil supply.


Slack primed as latest unicorn to make market debut

Updated 19 June 2019
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Slack primed as latest unicorn to make market debut

  • Slack is a cloud-based software company that markets online tools for information sharing and workflow management
  • Current customers include Nordstrom, Ford and HSBC and the company has more than 95,000 paid customers overall

NEW YORK: The 2019 parade of big new Wall Street entrants continues this week with the debut of Slack Technologies, underscoring investor hunger for new companies in spite of some high-profile stumbles.
Nearly halfway through the year, US markets are on track for one of the biggest IPO seasons ever in terms of money raised following a stream of offerings from former “unicorns,” private companies worth more than $1 billion.
Yet two of this year’s biggest names — Uber and Lyft — currently trade below their IPO price, along with Snapchat, which has lagged its initial price for most of the time since it went public in March 2017.
Still, there have also been plenty of prominent companies that have risen since their initial public offerings, including jeans company Levi’s, Tradeweb Markets, which builds electronic marketplaces, Zoom Video Communications, and mobile application and software system Pinterest.
The most dramatic jump has been in food company Beyond Meat, which now trades at more than six-fold its entering price.
“The public has a huge interest” in new companies, said JJ Kinahan, chief market strategist at TD Ameritrade, adding that the mixed performance of the 2019 ex-unicorn class is comparable to that of the broader market.
“There aren’t a lot of other choices besides IPOs for investors seeking growth,” said Gregori Volokhine, president of Meeschaert Financial Services, who attributes the rush of funds in part to central bank policies promoting liquidity.
“There’s an excess of underinvested funds worldwide,” he said.
In terms of sheer volume, the number of IPOs in 2019 so far — 93 — is roughly equal to last year’s figure, according to Dealogic.
But the funds raised, $34.5 billion, stand 13.6 percent above last year’s sum and the highest for the comparable period since 2000, according to Dealogic data.

Direct listing
A cloud-based software company that markets online tools for information sharing and workflow management, San Francisco-based Slack parts ways from the other big companies this year by opting for a direct listing instead of an IPO.
This approach, which was also employed by Spotify last year, cuts down on fees to investment bankers in IPOs. Although existing shares can be sold, a direct listing does not issue new shares, averting share dilution but also forgoing the new funds raised in an IPO.
The process can also be riskier in terms of share price volatility compared with an IPO, where underwriters line up investors in advance. In a direct listing, shares are exposed more directly to the open market.
Slack chief executive and co-founder Stewart Butterfield described the company’s technologies as a “brand new category of software” that replaces email in a company.
Current customers include Nordstrom, Ford and HSBC and the company has more than 95,000 paid customers overall.
“It turns email to messages and organizes them into team, project and topic based channels instead of individual in-boxes,” Butterfield said in a June 10 earnings conference call.
“It’s a team-first approach to communication, in contrast to email’s individual first approach. It creates a rich, searchable, permanent body of information that’s widely available across an organization, even for people who just joined the team.”
 

Unprofitable three years
The company, which is expected to be valued at around $17 billion when it enters the market on Thursday, reported revenues of $134.8 million in the quarter ending April 30, up 66.7 percent from the year-ago period.
But Slack, which has been unprofitable the last three years, reported a $33.3 million loss during the period, 34 percent more than last year’s loss.
Of course, many unprofitable companies have gone public and done well in markets for years. Yet the heavy losses and murky profit outlook at Uber and Lyft have been seen as factors in their lackluster performance since going public.
But investors remain keen on growth stories following the success of Amazon, Facebook and other tech giants that have emerged in recent decades.
A key beneficiary of this desire has been Beyond Meat, which has multiplied in value many times since going public May 3 at $25 and currently is priced at $168.92. The company has been seen as a main beneficiary of the growing alternative protein market, which some analysts think could top $100 billion in the coming decade or so.
Kinahan said in general investors have wised up after the early 2000s Internet bubble but that “it’s just unnatural” for stocks like Beyond Meat to move in an unbroken straight line upwards.
“There’s a healthy bit of skepticism in the market,” he said. “However, certain companies have maybe gotten a little ahead of themselves.”