Energy major Saudi Aramco remains in discussion with Reliance Industries Ltd (RIL) for a potential deal to buy a 20% stake in its oil-to-chemical (O2C) unit, Morgan Stanley Research said on Monday in a note to clients.
The research firm cited Saudi Aramco’s analyst call post announcing its 2020 earnings this week.
“Saudi Aramco’s CY20 conference call indicated that it is still in discussion with Reliance to evaluate existing opportunities as potential partners, regarding the non-binding MoU signed with Reliance for its O2C business,” Morgan Stanley said in a note.
RIL had announced plans to sell a 20% stake in its O2C business to Saudi Aramco as part of its deleveraging exercise in August 2019. Last July, however, RIL’s chairman and managing director Mukesh Ambani said due to unforeseen circumstances in the energy market, the deal has not progressed as per the original timeline.
Saudi Aramco on Sunday posted a 44.4% slump in 2020 net profit due to lower crude prices, even as CEO Amin Nasser described the last twelve months as one of the most “challenging years” in recent history.
The company reported net income of $49 billion in 2020, down from $88.19 billion in 2019.
Last month, RIL transferred its oil-to-chemicals operations to its wholly-owned subsidiary for a $25 billion loan, besides $12 billion equity. The O2C unit includes its refining, petrochemicals, fuel retail (majority interest only) and bulk wholesale marketing businesses, among others. Last month,
The separation of the assets was planned as part of RIL’s target to sell 20% in its refining and chemicals business to Saudi Aramco.
Reliance had in 2019 attributed $75 billion as the value of O2C business after signing a non-binding letter of intent with Saudi Aramco. Morgan Stanley added that it expects the valuations and asset prices rebounding to levels seen in August 2019.
“We expect the stake sale discussions to pick up the pace – we see valuations and asset prices rebounding to levels seen in August 2019 with a much-improved industry outlook.”
