Saudi Aramco

IThe business

Aramco finds, pumps, ships and refines oil and gas for a country. It is headquartered in Dhahran. Its history runs back to the 1933 concession, and the Company in its present form was set up in 1988 and converted to a joint stock company on 1 January 2018.² Under the Concession Agreement it holds the exclusive right to explore for, produce and market hydrocarbons in the Kingdom. The initial term is 40 years, to be extended by the Government for 20 more unless Aramco fails certain conditions, and it can be extended again by agreement.² Every hydrocarbon in the ground belongs to the Kingdom until it is extracted, and the Hydrocarbons Law gives the Government the sole say over how much may be produced.² I start with that because it shapes the rest. Aramco is not a company that owns oil. It is a company that is paid to operate it, on terms the owner can change.

The shares were listed on the Saudi Exchange on 11 December 2019. There are 242 billion of them, after bonus issues of 20 billion in 2022 and 22 billion in 2023.² The Government held 81.48% directly at the end of 2025. Another 16.00% sits with companies of the Public Investment Fund, the sovereign wealth fund, and 2.48% is public. The company itself holds 0.04% as treasury shares.⁵ Together that is 97.5% in state hands. When I write about a minority holder in this page, I mean someone who owns part of that 2.5%.

The size of what the company does is plain. In 2025 it produced 12.9 million barrels of oil equivalent a day. Liquids were 10.7 million barrels a day, which is crude oil, natural gas liquids and condensate. Gas was 11.4 billion cubic feet a day. Its refineries could process 4.2 million barrels a day on its share, and its chemicals plants could make 59.3 million tonnes a year.⁵ The Government told it on 30 January 2024 to keep its maximum sustainable capacity at 12.0 million barrels a day of crude. Aramco pays to keep that spare room and has used a lot of it in the past, but it may not do so in the future, and the Government can change the target.⁹

Two businesses, one big and one small

Upstream is oil and gas production. Its adjusted EBIT, which is operating profit before interest and tax, was SAR 732.9B in 2025, or $195.5B. Downstream is refining, chemicals and fuel sales. Its adjusted EBIT was SAR 37.6B, $10.0B, which sounds small but was four times 2024’s SAR 8.9B.⁴ So about 95% of the profit comes from the ground, and the other 5% matters at the margin. In the first half of 2026 downstream earned $11.7B against $4.8B a year earlier, because refining margins were high.¹⁰ Downstream is also where Aramco has had to take losses on the way. In 2025 it booked SAR 32.4B of impairment and held-for-sale losses, mostly from deciding to sell parts of SABIC, the chemicals company it holds 70% of.²⁴¹³ In 2026 it agreed to sell its stake in the PRefChem refinery to PETRONAS.³

Where the cash goes

The company reports in riyals, and the riyal has been pegged to the dollar since 1986, at SAR 3.75.⁹ I give both. In 2025 revenue and other income related to sales was SAR 1,671B, $446B. Costs took it down to SAR 707B of operating income. Income tax and zakat took SAR 353B, and net income was SAR 350B.² On top of that, SAR 151B went out as royalties and other taxes, which sit inside operating costs.² I add the two. Of every SAR 100 of profit before royalty and tax, the state took 59 and the company kept 41 C (calculated). The rest of this page is about that SAR 41, and how much of it is left for a minority holder.

The line called other income related to sales is the Government’s price-equalization payment. Aramco must sell crude and some refined products inside the Kingdom at regulated prices, and the Government makes up the difference to the export price. It was SAR 111.9B in 2025 and SAR 164.4B in 2024.²⁹ When oil was high in the second quarter of 2026, the amount owed to Aramco by the Government on the balance sheet rose from SAR 29.3B at the end of 2025 to SAR 76.5B at 30 June.³ The company calls this a temporary build that it expects to settle in the third quarter.¹⁰ The owner of the shares is also the debtor. I come back to that in Management and again in Risks.

Gas, and what is being built

The company is spending to raise its sales gas capacity by about 80% by 2030 from 2021’s level. The Jafurah field, an unconventional gas field, began production in 2025. Phase two of its gas plant is due in 2027, the Fadhili expansion in 2027 and the Zuluf crude increment in 2026.⁵¹⁶ Management has said the gas build could add $9B to $10B a year of operating cash flow by 2030 and downstream growth $8B to $10B, both subject to prices.¹⁷ I treat those as targets and not as facts. In October 2025 the company sold 49% of Jafurah’s midstream arm, which holds the plant and the fractionation plant, to a group led by funds managed by Global Infrastructure Partners, part of BlackRock, for SAR 41.8B up front. It leased the plant to that arm for 20 years and keeps control.² I treat this as borrowing, and the next section shows why.

The year the Strait closed

Everything about 2026 is odd. In the second quarter the company’s own report says that regional uncertainty gave higher prices for hydrocarbons and lower volumes sold.³ Liquids production fell from 10,561 thousand barrels a day in the first quarter to 7,566 in the second, and gas from 10.5 to 9.9 billion cubic feet. The realized crude price was $108.1 a barrel, against $76.9 in the first quarter and $66.7 a year before.³ The company says over 2 billion barrels of supply were lost through the Strait of Hormuz to the end of July, and that its East-West pipeline, which runs oil across the Kingdom to Yanbu on the Red Sea, kept exports moving.¹⁰ It also says certain facilities in the Kingdom were targeted in attacks in the second quarter and in July, with no material impact on its results to 30 June.³

The same pipeline then came under attack. Press reports from September, which I cannot confirm from the company, say drones hit pumping stations on the 7-million-barrel line, that it restarted at reduced rates, and that Aramco was aiming for about 4 million barrels a day.¹⁸ The EIA’s October outlook also names attacks on the pipeline and expects Middle East flows to stay constrained through the fourth quarter.¹⁹ Reuters reported on 13 October that Saudi Arabia told OPEC it pumped 8.37 million barrels a day of crude in September, more than 2 million above August.²⁰ The OPEC quota for November is 10.478 million, unchanged.²¹ So there is no clean way to say what the company can sell next year. That uncertainty is the main reason I show three cases rather than one number. Aramco’s third-quarter results are due on 3 November.¹⁰

Look at that chart. Brent was up 100% from December to October on average C (calculated), and the share is roughly where it was. The next section explains one reason: most of each extra dollar goes to the state. The other reason is the lost barrels.

IIThe moat

A durable business keeps others from taking its profits. For an oil producer, the first test is cost, and Aramco passes it. Its proved reserves, counted on the term of the Concession, were 247.2B barrels of oil equivalent at the end of 2025, down from 250.0B a year before. At 2025’s output that is 52.5 years C (calculated).⁸⁵ The company claims reserves life five times longer than the large international oil companies, without needing to buy reserves.¹⁰ It is the company’s claim and I have not checked the comparison. Supply reliability was 99.9% in 2025.⁵

The second test is whether the profit holds when prices fall. Here Aramco is much better than most. Its net income stayed positive in the 2020 slump, at SAR 183.8B, when its realized price averaged $40.6 a barrel.¹³ In the seven years of annual reports I read, 2019 to 2025, net income was positive every year.

The third test is the one that matters to a buyer of the shares. Protection is only worth owning if its income reaches the owner. Here it is weaker than it looks, for two reasons.

First: the state is the first claimant

Royalties on crude and condensate follow a schedule set in 2020. The first $70 of a barrel pays 15%. Between $70 and $100 the marginal rate is 45%. Above $100 it is 80%.⁸² Then income tax of 50% applies to upstream profit, with royalty deducted before the tax. Downstream and non-associated gas pay 20%.² At a Brent price of $50, the company keeps about $19 of each barrel, after my $6 estimate of running cost. At $100 it keeps $36. At $150 it keeps $42 E (estimate).

This is the single most important fact on the page, and I rarely see it in a summary of Aramco. Each extra dollar above $100 leaves the company 10 cents: 20 cents after royalty and half of that after tax C (calculated). Between $70 and $100 it leaves about 27.5 cents. Below $70 it leaves about 42.5. So the company is an option on lower oil prices holding up, and a poor option on higher ones. The second quarter shows it. The realized price was $108, the highest in years, and yet upstream adjusted EBIT was $50.9B, below the $54.2B of the first quarter at $77.¹⁰ Lower volumes and the royalty rate explain that.³

Second: the state is also the owner and the customer

The Government decides how much oil Aramco may sell, sets the capacity it must hold, and can send it on projects outside its core business that are not always consistent with its immediate commercial objectives.⁹ In 2025, the oil sector was 54.2% of the Government’s revenue, and the Government says it will keep relying on royalties, taxes and dividends from Aramco.⁹ So the same party sets the royalty, takes the dividend, settles the equalization bill, and appoints the board. I am not saying it abuses that position. Its base dividend has risen every year since 2022.¹⁰ I am saying a minority holder has no say in any of it, and my values must carry that fact in the discount rate and in the cases.

Evidence it is widening

The company reports a return on average capital employed of 22.1% for the twelve months to June 2026 and says that is about twice the average of the large international oil companies it names.¹⁰ Gearing of 6.2% is the lowest of that group by its count.¹⁰ It sold stakes in its own pipelines and gas plant for cash, which shows outside investors will pay for the tariff income, and it raised $4.0B of bonds in February 2026 at coupons of 4.0% to 6.0%, for terms from 2029 to 2056.³ The longest note, due 2056, pays 6.0%. That is the market’s price for lending to Aramco for thirty years, and I use it later.

Evidence it is narrowing

Volume is the weak point in 2026, and it is outside the company’s hands. A producer whose export routes can be shut by a neighbour does not control its own revenue, however low its cost. The East-West line carried roughly 5.5 million barrels a day before the September attack, according to Kpler as relayed by a press report I cannot confirm from the company.¹⁸ Whatever the number, a single pipeline is a single point of failure.

The second narrowing is reserves. Proved reserves fell by 2.8B barrels of oil equivalent in 2025, while the company produced 4.7B. The company replaced about two fifths of what it produced C (calculated).⁸⁵ I would not call this a worry at 52 years. I mention it because the figure moves, and the company counts reserves by the term of the Concession, which is not the same as the Kingdom’s estimate of 342B in the fields Aramco operates.⁸

My judgement: the cost position is the best in the industry and will remain so. The share of the profit that reaches a minority holder is set by the Government and fell when the 2020 amendment cut the base royalty from 20% to 15% but raised the top marginal rate from 50% to 80%.⁸ The first fact makes it a good business. The second makes it a worse share than the business suggests.

IIIThe competitive advantage

The table compares Aramco with the two large American oil companies, and Exxon Mobil has its own page on this site. It measures what a buyer of the shares gets, and not how big the operations are.

Aramco is cheaper on earnings and pays more than twice the dividend yield of either. It also has a stronger balance sheet on the company’s own count. That is a fair case for owning it, and I do not dismiss it. Two things stand in the way of accepting it at face value. The first is the yield. The base dividend costs SAR 328B a year at the 2026 rate of SAR 1.3572 a share. Owner cash, the money that is really left after everything, was SAR 294B in 2025 and SAR 279B in the last twelve months C (calculated). I explain that number in the next two sections. The second is the difference in kind. Exxon and Chevron belong to their shareholders, who elect the board and approve the policy. At Aramco 97.5% of the votes belong to the state.

Where Aramco wins

Cost and reach come first. It can produce up to 12.0 million barrels a day of crude when asked, and it reached 12.9 million barrels of oil equivalent in 2025 R (reported).⁵ The company says it has material volume upside on available crude capacity while peers have already maximized production.¹⁰ If it can be sold, a further million barrels a day would add about $12B of operating cash flow at 2024’s average price, by the company’s own estimate.¹⁷ My model gives about $11B at $80 once royalty and tax are taken out, so the company’s figure fits the schedule E (estimate).

Next is the balance sheet. At 30 June 2026 borrowings, which include leases, were SAR 355.2B, and net debt on the company’s definition was about SAR 119B, a gearing of 6.2% C (calculated).³ It sold $4.0B of bonds in February at coupons of 4.0% to 6.0%.³ Its quarterly base dividend is 17% above its 2022 level and rose 3.5% for 2026.¹⁰ Third, it can reach buyers by three routes in a closure: the Gulf, the Red Sea and the Mediterranean.¹⁰

Where Aramco loses

It loses on control, and the Strait made that plain. The interim report says certain facilities in the Kingdom were targeted in attacks in the second quarter and in July.³ And in a price spike its profit grows by less than the price does. In the six months to June the realized price averaged $90.1 against $71.5 a year before, and adjusted net income rose 29%.¹⁶¹⁰ That is a good result. It is not the result of a company getting all of a windfall.

It loses a little on free float, too. Only 5.99B shares trade, 2.5% of the company, about SAR 155B or $41B at the price C (calculated).²³ That has two effects. A passive fund can’t buy much without lifting the price, which may hold the price up. And the state, as the controlling holder, could sell more, as it did in the secondary offering of June 2024, when about 1.7B shares, 0.7% of the company, went at once.²

The next best use of the same money

The simplest alternative is a US Treasury bond. The 10-year yield was 4.98% in late October.²⁴ The next is Aramco’s own debt. The 10-year note it sold in February 2026 pays 5.0%, a fixed claim ahead of every shareholder.³ The share’s base dividend yield is 5.24%, and the dividend is not covered by owner cash with room to spare. So the shareholder gets about 0.2 points more than the same company’s bondholder and takes the oil price, the Government and the volumes on top. That is not enough on its own. It is worth something only if the dividend grows, and growth at 3.5% a year is exactly what the company has promised. Against Exxon and Chevron, a dollar in Aramco earns a larger cash yield and has a smaller say. On this site the nearest energy names are Constellation Energy, whose price is 20% above my base value there, and Cameco, 97% above, so a share priced above its value is not unusual in this group, and Aramco’s 43% sits between them. I come back to the price in Valuation.

IVManagement

Amin Nasser is President and Chief Executive Officer and an executive director since 2010. He is 67, studied petroleum engineering at KFUPM and graduated in 1982, and ran Upstream from 2007 to 2015.⁶ Ziad Al Murshed is Chief Financial Officer. Yasir Al-Rumayyan is chairman and, in the report’s words, Governor of the Public Investment Fund.⁶ Eleven people sit on the board. Five are independent, including Bob Dudley, who was chief executive of BP from 2010 to 2020, and Andrew Liveris, who was chairman and chief executive of Dow from 2006 to 2018. The others include the Minister of Finance, the Minister of Economy and Planning, and the deputy chairman, who was Minister of Finance from 1996 to 2016.⁶ I found nothing in the annual report about who follows Nasser. That is a gap, not a finding, since boards often do not disclose it.

How they are paid, and what it pays them to do

The five best-paid executives, which include the CEO and CFO, drew SAR 121.5M in 2025, about $32.4M. Fixed pay was SAR 30.3M. Variable pay was SAR 58.4M, of which SAR 35.5M was the annual cash bonus and SAR 19.4M was shares granted for 2023 to 2025. End-of-service awards added SAR 32.8M C (calculated).⁶ The annual bonus runs on a scorecard of financial, operational and safety and sustainability measures. The three-year plan rewards financial, strategic and environmental measures and pays in shares that vest after the period.⁶ The report does not publish the weights or the targets, so I cannot say what the pay is aimed at. Two points follow. About two thirds of pay outside end-of-service awards is variable, which is healthy. And since the targets include safety and sustainability goals as well as profit, I cannot tell whether a good year for the oil price is also a good year for the bonus.

Think about what that table says. The CEO’s holding is worth about SAR 35M, one and a half times the average total of the five best-paid executives, SAR 24.3M C (calculated). It rose by 306,017 shares in a year, almost all by vesting, so it is a result of the plan and not of any purchase. Every executive and director together own a tiny part of the company. That is normal for a state company. It means their incentive to maximize what reaches the minority holder is weaker than the incentive on a manager with a large stake. Their interest is in the Kingdom’s approval, and the Kingdom’s interest is bigger than this share price.

What they did with capital over a cycle

Judge the managers by the choices they made with the money. Three stand out.

First, dividends. The base dividend rose every year in the period, and the company introduced a performance-linked dividend in 2023 to pay out 50% to 70% of free cash flow left after the base dividend and outside investments.⁶ When oil was high in 2022 and 2023 it paid SAR 161.6B of extra in 2024, a total shareholder payout of SAR 465.9B in one year.⁶¹⁵ When oil was lower it paid SAR 3.3B in 2025.⁶ The mechanism did what it said. It also meant that the minority holder was paid a large amount in a high-price year, which tells you the dividend mostly follows oil.

Second, selling stakes in its own assets. The cash flow statements show proceeds from selling non-controlling interests in subsidiaries of SAR 46.5B in 2021, SAR 58.1B in 2022 and SAR 41.8B in 2025, SAR 146.5B in all.¹⁴² Each sold a minority stake in a subsidiary that holds pipelines or a plant, with the assets leased to it or operated for a tariff; the 2022 report names a gas pipelines transaction as a key audit matter and the 2025 report names the Jafurah midstream arm.¹⁴² The cash is real. So are the tariff and distribution payments to the buyers that follow, which sit in lines that the headline free cash flow figure ignores: lease principal, interest and dividends to minorities in subsidiaries. I include them in owner cash in Section V.

Third, acquisitions. It bought 70% of SABIC in 2020.¹³ Its auditors made recoverability of goodwill and the SABIC brand a key audit matter as late as the 2022 report.¹⁴ In 2025 it recognized SAR 32.4B of impairment and held-for-sale losses, mostly from deciding to sell SABIC’s European petrochemicals and engineering plastics businesses, and in May 2026 it agreed to sell PRefChem.²³ I cannot compute a return on the SABIC purchase from public figures. I can say that the plan to sell parts of it is an admission that some of it did not fit.

Buying back stock is new. In March 2026 the board approved up to 350 million shares, at most SAR 11.3B, over 18 months, for employee share plans. By 30 June it had bought 83.8 million for SAR 2.3B.³ That is not a return of cash to owners. It stops the share count from growing as staff are paid in stock. I deduct about SAR 7.5B a year for it in owner cash E (estimate).

A conflict worth stating

The Government is the largest shareholder, the royalty collector, the tax collector, the customer for regulated sales, the party that sets the production ceiling, and the debtor on the equalization receivable. The annual report says it may direct Aramco to take on projects outside its commercial interest, and that it has done so in the past.⁹ Aramco has also signed a non-binding term sheet, in October 2025, to buy a significant minority stake in HUMAIN, a PIF company that works on artificial intelligence.⁵ I cannot judge whether those are good uses of Aramco’s money. I can say that the minority has no vote that could stop them, which is why I add half a point to the discount rate (Section VI).

VFinancials

Aramco’s annual reports begin with 2019, the year of the listing. That gives seven years, 2019 to 2025, and the first half of 2026. The 2016 to 2018 figures sit in the 2019 prospectus, which I could not retrieve, so I show seven years and not ten. The amounts are in Saudi riyals, with dollars at the 3.75 peg that the company uses in its own tables.² Where a later report restated an earlier year, I use the later one. For example, the 2024 report counts 2024’s depreciation as SAR 103.2B, and the 2025 report splits the same year into SAR 91.7B of depreciation and SAR 11.8B of impairment.¹⁵²

The pattern is a business that moves with oil but only in part. Revenue was SAR 2,266B in 2022 and SAR 1,671B in 2025, a fall of 26%. Net income fell further, from SAR 604B to SAR 350B, a fall of 42% C (calculated). The realized price fell 31%, from $100.2 to $69.2, and liquids output was 7% lower, 10.7 against 11.5 million barrels a day.¹⁴⁵ Costs and the 50% tax rate do not fall with the price, so profit moves faster than revenue.

Operating margin was 42.3% in 2025 and 50.5% in 2022 C (calculated). The effective tax rate on income before tax and zakat was 50.2% in 2025 C (calculated).² This is unusually high for any company, and it is why I keep the schedule in front of every number.

Spending

Capital spending went from SAR 101B in 2020 to SAR 190B in 2025, about twice the SAR 93B of depreciation. The company's 2026 guidance for capital investment, which includes some outside investments, is $50B to $55B, or SAR 188B to SAR 206B, and it says additional investments such as HUMAIN are subject to accretive opportunities.¹⁰ Aramco does not say how much of the spending is only to stay still and how much is growth. I can't split it. I know it includes the sales gas build, crude oil increments to keep the 12.0 million barrels a day of capacity, and downstream projects such as the S-OIL steam cracker.⁴ Section VI tests what happens if the total falls or rises by 10%.

What an owner can take out

The company’s free cash flow is operating cash flow less capital expenditures. It leaves out three costs that are real for a shareholder. Interest on borrowings is paid out of financing cash flow. Lease principal, which includes the payments for the plants Aramco has sold and leased back, is also in financing. And dividends to the minority holders of subsidiaries, such as SABIC’s, leave the group but are not an operating cost either. I subtract all three and add back the interest and joint-venture cash that come in. The result I call owner cash.

The picture splits in two. From 2021 to 2023, owner cash was far above the dividend: SAR 1,279B against 929B C (calculated). In 2024 and 2025 the dividend was above owner cash: SAR 786B paid against 598B earned C (calculated). The gap of SAR 188B was met by net new borrowing of SAR 64B over the two years, by the SAR 41.8B from the Jafurah sale, and by running down cash.² Gearing moved from −6.3% at the end of 2023 to 3.8% at the end of 2025.¹⁷⁴ The company paid out about as much as it earned over five years and more than it earned in the last two. At Brent near $70 the dividend I describe in Valuation takes all of owner cash and a bit more.

2026 so far

The first half of 2026 gave operating cash flow of SAR 210.6B and capital spending of SAR 94.7B, so company free cash flow was SAR 115.9B, against SAR 164.2B of dividends.³ That looks like a failure to cover the dividend. It is partly an accounting timing effect. Working capital absorbed SAR 110B in the half: SAR 47.2B more owed by the Government, SAR 38.0B more owed by trade customers, SAR 34.9B more inventory, SAR 13.8B more other assets, less SAR 18.7B more payables and SAR 5.0B more royalties payable C (calculated).³ The company says the second-quarter build of $13.6B is temporary and that free cash flow excluding working capital changes was $25.9B in the quarter and $60.3B in the half.¹⁰ I take it at its word for the Government’s receivable, which is the biggest item. I do not take it for inventory and customer receivables, which depend on prices staying high. Over the last twelve months, net income was SAR 412B, operating cash flow SAR 499B, capital spending SAR 192B and owner cash SAR 279B C (calculated). That is 4.5% of the market value.

The cash at the end of June was SAR 167.4B, down from SAR 243.1B in December, and borrowings were SAR 355.2B including leases.³ Equity was SAR 1,795.8B, of which SAR 226.4B belongs to minority holders in subsidiaries.³ Nothing here looks stretched. The balance sheet is a strength. What would stretch it is a long period in which the dividend sits above owner cash. In the base case I use, that does not happen. In the bear case it does.

VIValuation

First, how this goes badly wrong

Before any number, I ask what would most likely destroy the value of a share, and work backward. For Aramco I see three.

The first is that oil falls and stays low once the Strait reopens. Prices near $125 invite demand cuts and new supply elsewhere, the Strait’s reopening brings back barrels that are missing now, and the Kingdom holds 12.0 million barrels a day of crude capacity it can use. That is my reasoning, not a forecast E (estimate). If Brent sits near $58 from 2028, which is my bear, the business still earns, but owner cash falls to about SAR 180B a year, or 55% of the base dividend E (estimate). The dividend would have to be cut, or paid from debt. Gearing would climb. Then the share would trade like a company that has just cut its dividend.

The second is that the state changes the terms. It did in 2020, when it cut the base royalty from 20% to 15% and raised the top rate from 50% to 80%.⁸ The oil sector gives it 54.2% of its revenue, and the minority holder has no vote that could resist a new royalty, a higher production target, an order to take on a project, or a lower dividend.⁹ I cannot price that. I add half a point to the discount rate for it and show the sensitivity.

The third is that volumes stay down or assets are damaged. The second-quarter output of 7.6 million barrels a day is 29% below 2025’s average C (calculated).³ Pipelines and gas plants have been hit this year.³¹⁸ If that persists into 2028, my base volumes are too high. I put 10.0 million barrels a day in my bear against 10.8 in the base.

What I can and cannot judge

I can read a cash flow statement and a royalty schedule. I can say what a barrel leaves for the company at each price. I cannot say when or how the Strait reopens, what the Government will do with its royalties in a fiscal squeeze, or where oil will trade after 2030. Those are the inputs that matter most, so I give a range and not a precise number. I also cannot split Aramco’s capital spending into the part that holds capacity flat and the part that grows it, because the company does not, so I tested the effect of moving the total by 10% instead of guessing: it moves the base value by about SAR 1 either way E (estimate).

Cash after stock pay and after standing still

The cash that matters is owner cash: operating cash flow less capital spending, interest, lease principal, and dividends to the minorities in subsidiaries, with interest and joint-venture cash added back. In 2025 it was SAR 294B, against reported free cash flow of SAR 320B, 8% less, and against net income of SAR 350B, 16% less C (calculated). On top of that I deduct SAR 7.5B a year for the shares the company buys to pay staff. Stock pay at Aramco is small. It was SAR 0.6B in 2025 in the equity statement.² The buyback is larger, but it too is small next to the SAR 330B.³ Capital spending is the real question. Depreciation was SAR 93B in 2025 and spending was SAR 190B. If all of the difference is growth, owner cash is understated, since growth is what the money is for. If much of it is the cost of keeping 12 million barrels of capacity and the gas plants running, it is not.

The method, in plain words

The model has five parts. First, the oil. I multiply the barrels by the Brent price and subtract royalty by the schedule in Section II, scaled to 93% because the actual royalties and other taxes run at that share of the schedule when I test it on 2025, and $6 a barrel of cash running cost.² Then half of what is left goes in tax, and I add back half of depreciation as a tax shield. Second, a single figure for the gas, refining, chemicals and everything else after their own tax, which I call the other businesses and set from 2025. Third, capital spending. Fourth, the leaks that the company free cash flow ignores: interest, leases, minority dividends and stock pay. Fifth, working capital and the discount rate.

I discount at 9.0%. The 10-year Treasury was 4.98% on 29 October.²⁴ I add 3.5% for owning a large and cyclical oil producer and 0.5% for owning a minority piece of a company that a state controls. The riyal is pegged, so a dollar rate applies. Cash flows arrive at each year end, counted from the price date, and the last two months of 2026 come first. After 2036 the cash grows at 1.5% a year in the base case. Cash for November and December is the base case at $110 oil and 9.0 million barrels.

So in the three years I can check, the model is within 7% of operating cash flow. In the first half of 2026 it is low by about a sixth. I find that tolerable for a model whose purpose is to compare cases. It would be wrong to call it exact. A plus or minus 25 on the other businesses moves the base value by about SAR 1.3 a share E (estimate).

Three cases

The base follows the EIA’s October outlook for 2027, $84, and then fades to $72 from 2029, near 2025’s average of $69. Volumes recover to 10.8 million barrels a day, a little over 2025’s, as the Strait reopens. The other businesses grow to SAR 127B by 2036, which takes about half of what management says gas and downstream growth could add by 2030.¹⁷ Capital spending stays near SAR 200B for two years and eases to SAR 178B. Working capital releases SAR 35B in 2027. The bear is the case where oil falls back to $58 and volumes stay near 10 million. The bull has oil at $85, volumes of 11.5 million barrels, and the full company targets for gas and downstream. I weight them 25%, 50% and 25%, which gives SAR 17.6. That weighting is not used in the three values.

Look at where the value sits. In the base, 47% comes after 2036. That is normal for a business with 52 years of reserves. It also means a point of discount rate matters more than a year of oil. The base is worth SAR 20.8 at 8% and SAR 16.0 at 10% E (estimate).

What the price needs

Of all these lines I find the first the most telling. No plausible oil price rescues the price at 9%, because the state keeps almost everything above $100. So the price has to be explained a different way. Either more barrels get sold, or the market is using a lower discount rate. A rate of 6.7% with my base cash is the price. That is not absurd: it is a 5.2% dividend yield and 1.5% growth. A buyer who sees the share as a state-backed income stream, close to a bond, might require exactly that. I do not require it, because a bond has a fixed claim, and the owner of a share has a residual one.

The price against the range

The price is 43% above my base and 0.5% under my bull. The margin-of-safety price is SAR 10.9, where my SAR 8.2 bear value equals three quarters of the price paid, so that the downside I can see is about a quarter of the price. It is 58% below the market. I would not count on seeing it. A price that low would need oil near $60 and a cut dividend, and there the shares would trade near it.

Quality and price are separate questions. Aramco is a very good business: low cost, long reserves, strong balance sheet, a 22% return on capital. For a minority holder at SAR 25.92 it looks like a good business at a full price, one that already assumes some of the good luck. It is the share’s price that runs ahead of my values, not the company’s quality.

Where this could be in 5 and 10 years

Value in a later year is my model rolled forward. It is the present value at that date, at 9.0%, of the owner cash still to come after it and the terminal value, per today’s 241.9 billion shares and in that year’s riyals. Owner cash is assumed paid out.

For the base to hold at five years, oil has to settle near $72, liquids near 10.8 million barrels, and the other businesses near SAR 116B by 2031, at capital spending of SAR 185B. Owner cash is then SAR 352B a year. For ten years it needs the same, and about SAR 365B in 2036 E (estimate). The cases differ on three numbers: Brent from 2029 is $58, $72 and $85, liquids are 10.3, 10.8 and 11.5 million barrels, and the other businesses reach SAR 71B, SAR 127B and SAR 162B by 2036.

The most likely way the base is wrong is the oil price. Every $10 off the long-run price takes about SAR 2 off today’s value and a similar amount off the value in 2036. The base returns 3.9% a year from today’s price. Owner cash paid out averages about 5.7% of the price a year, and the value of SAR 20.4 in 2036 is below today’s price, which takes about 2.4 points a year off E (estimate). These are estimates of value, not forecasts of the share price, and the market can sit above or below value for years.

VIIThe case for the price

What most people miss

Three things cut in the company’s favour. First, working capital. It absorbed SAR 110B in the first half, SAR 47.2B of it as a larger Government receivable, and the company says the second-quarter build settles in the third quarter.³¹⁰ My base releases only SAR 55B E (estimate). Second, downstream earned $11.7B in the half against $4.8B a year earlier, on refining margins.¹⁰ Third, volume. The Government has Aramco hold 12.0 million barrels a day of crude capacity, and 2025 liquids output was 10.7 million. A million more a day adds SAR 1.9 a share to my base E (estimate).⁹⁵

The bull case

The argument runs like this. Aramco is the lowest-cost, longest-lived supplier in a world that has just learned how fragile supply is, and it will be paid to rebuild inventories and use its spare capacity. Amin Nasser said in the half-year release: “the importance of both energy security and energy addition has never been clearer.”¹⁶ The slides add material volume upside on available crude capacity and a visible cash flow growth trajectory.¹⁰ Eighteen analysts, whom the data provider does not name, average a target of SAR 30.24, in a range of SAR 27.00 to SAR 35.00. I can only cite that secondhand.²⁵ The one named investor I can verify is Green Palm, led by funds managed by Global Infrastructure Partners, part of BlackRock, which paid SAR 41.8B for 49% of the Jafurah midstream arm in October 2025.² That is a 20-year tariff stake and says little about the share price. I found no filing showing a named fund holding the shares.

Against reality

If volumes return to 11.5 million barrels, Brent holds near $85, and gas and downstream reach management’s 2030 targets, my model gives SAR 26.1 and the price is possible. Today is far from that. Second-quarter liquids output was 7.6 million barrels a day, the EIA expects $84 in 2027 and not $85 for ten years, and the other businesses were worth about SAR 72B in 2025 against SAR 136B in the bull for 2030 E (estimate).³¹⁹ Multiply the steps. The Strait normalizes by mid-2027 and volumes pass 11 million by 2028, 60%. Brent averages $85 or more from 2029 to 2035, 30%. Gas and downstream reach the targets, 50%. The Government keeps royalty and dividend terms, 85%. Together that is 8% E (estimate). These are guesses and not independent, since oil and volumes share a cause, so I put the bull nearer 15%. What the price needs instead is a discount rate of 6.7% on my base. A holder who sees a bond with a growing coupon, backed in effect by a sovereign, might use it, and at 7% my base is SAR 24.5.

What a 10x would take. Ten times SAR 25.92 is SAR 259, a market value of $16.7 trillion. NVIDIA, the largest company I cover, is worth about $5 trillion on its page. At 20 times earnings that needs net income of about SAR 3.1 trillion, against SAR 412B in the last twelve months and SAR 604B in 2022, the best of the seven years I read C (calculated).¹⁴ At 12 million barrels a day and Brent at $150, my model leaves the oil business about SAR 694B after royalty and tax, a quarter of that E (estimate). Over ten years it would be 26% a year. It is close to impossible, and I would not build a case on it.

Where I come down

What moved me most is the royalty and tax schedule, and the lines that company free cash flow leaves out. They put owner cash at SAR 330B in my base, a bit above the dividend, and they cap what a spike in oil can do for a minority holder. What did not move me is the oil price itself. A month at $125 is not a business. Sustained volumes near 11.5 million barrels with oil at $85, a state that keeps its terms, or capital spending that falls faster than I allow would raise my values. A lower discount rate would too, and that is a judgement about the Kingdom and not about the oil, which is why I show it.

VIIIRisks, and what would change my view

The three ways this goes badly wrong are at the start of Valuation. These are the rest.

• The Strait and the pipeline. The company says over 2 billion barrels of supply were lost through the Strait.¹⁰ Its main bypass is a single pipeline, and press reports say drones hit it in September.¹⁸ The risk is a longer closure, not a shorter one, and damage to Aramco’s own sites. The July attacks did not hurt the first half, by the company’s account.³
• Dividend discretion. Dividends are at the board’s sole discretion after it considers cash, working capital and funding needs.¹⁰ The Government relies on them for revenue, which supports the dividend, but the same need could push toward higher royalties.⁹
• Control by the state. It sets production ceilings, can direct projects outside the core business, and can change the royalty and equalization terms.⁹ A minority holder has no vote on any of it.
• Share supply. The state sold 0.7% of the company in a secondary offering in June 2024.² A large new sale would add shares to a float of 2.5%.
• Currency. The riyal has been pegged to the dollar since 1986, and if it moved, riyal costs would change against dollar revenue.⁹ I have no evidence of that pressure.
• Demand. The long-run oil price after 2030 is the input I know least. A faster shift away from oil would cut my base and bull values.
• Reporting. Quarterly figures are unaudited. Auditors named the Jafurah minority sale, the value of property, plant and equipment and the assets held for sale as key audit matters for 2025.² The company has changed its definitions of ROACE and amended adjusting items in prior periods.⁴¹⁶
• Divestments. SABIC’s European business and engineering plastics, and the PRefChem stake, are being sold. Prices could differ from the carrying values.³

Geopolitical risk, and what it means for the value

Aramco sells most of its crude by sea. The annual report names the Strait of Hormuz, the Red Sea and the Suez Canal as its key routes, and records the Iranian seizure of two tankers in 2023 and the Red Sea attacks of January 2024.⁹ In 2026 the Strait closed, and the bypass, the East-West pipeline to Yanbu, was hit as well.¹⁰¹⁸ The report also lists Abqaiq, its largest processing plant, and that pipeline among the sites attacked in 2019.⁹ Iran, its allies in Yemen, the US and the Gulf states decide what happens next. Aramco does not.

The first result surprised me. A closure through 2027 barely moves the base, from SAR 18.1 to SAR 18.0, because higher prices make up for lost barrels and one or two years of cash is a small part of the value. What hurts is anything permanent: lost capacity, a lower long-run oil price, or a larger take by the state. The Government owns 97.5% and gets its dividends in dollars while other holders are paid in riyals.⁹ If it took SAR 30B a year more, the base falls to SAR 16.6. At SAR 60B it is SAR 15.1 E (estimate).

On OPEC+, a share war would be Riyadh’s choice, not a shock; the November quota is 10.478 million barrels a day.²¹ US ties work through three doors. Sanctions on Aramco itself are named as a risk in the filing, and I see nothing pointing to one.⁹ US antitrust suits over OPEC have been dismissed on sovereign defences, with no assurance that holds.⁹ Gulf security is the third. I do not model these; a freeze would hit trading in the shares more than the cash.

What is in the price: my base already carries half a point of discount rate for state risk. The price of SAR 25.92 sits at my bull, which assumes oil near $85, so it leaves little room for a lower oil price or a larger state take. Closure and attack risk change the cash for a year or two, a small part of the value. E (estimate)