A PROJECT REPORT ON-

“Fundamental and Technical analysis of Oil and Gas sector”

Submitted to

University of Mumbai for partial completion of the degree of MMS

(Masters in Management Studies)

Under the faculty of Commerce

By

Ishita Singh
BATCH 2021-23

ROLL NO: 211054

SPECIALISATION – FINANCE

UNDER THE GUIDANCE OF

PROF. ABHINAV CHOPRA

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 DECLARATION

I hereby declare that this Project Report titled “A Study on Fundamental and Technical analysis
of oil and Gas sector ”, submitted by me to PILLAI INSTITUTE OF MANAGEMENT
STUDIES AND RESEARCH, NEW PANVEL – 410206 is a bonafide work undertaken by me
and it is not submitted to any other University or Institution for the award of any degree diploma
or Certificate or published any time before.

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 CERTIFICATE

This is to certify that a project titled “A Study on Fundamental and Technical analysis of Oil and
Gas sector” is successfully completed by Miss. Ishita Singh during the 1st Semester, in partial
Fulfillment of the Master’s Degree in Management Studies recognized by the University of
Mumbai for the academic year 2021 – 23 through PILLAI INSTITUTE OF MANAGEMENT
STUDIES AND RESEARCH, NEW PANVEL – 410206.
This project work is original and not submitted earlier for the award of any degree / diploma or
associate ship of any other University / Institution.

Abhinav Chopra

Date: _____________________

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 ACKNOWLEDGEMENT

I would like to express my deepest gratitude and sincere thanks to my faculty project mentor
Professor Abhinav Chopra and company mentor Aniket Chandanshive for giving helpful and
important instructions to all before and throughout the project.
I also thank the Director of Pillai Institute of Management Studies & Research, New Panvel (Dr.
R. Chandran) for providing me the opportunity to embark on this project. This project has been
great learning experience for me.
I would like to thank each and every person who directly or indirectly helped me in the
completion of the project especially my parents and peers who supported me throughout my
project.

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 EXECUTIVE SUMMARY

Oil & Gas sector market size surpassed around USD 620 billion in 2021 and is projected to grow
at over 6% CAGR (Compound annual growth rate) from 2022 to 2030.
Oil and natural gas are major industries in the energy market and play an influential role in the
global economy as the world's primary fuel sources, it incorporates a stack of resources including
pipelines, refineries, drilling platforms, terminals, storage facilities, and processing plants in oil
& gas sector. The processes and systems also involve in producing and distributing oil and gas
are highly complex, capital-intensive, and require state-of-the-art technology.  Rising demand of
natural gas in line with growing exploration and production activities will positively sway the
business scenario.
The ongoing utilization of unconventional oil & gas assets including shale oil and tight gas along
with advanced technological solutions for increased efficient production rate of oil & gas will
drive the market penetration. Moreover, accelerating investment to increase the crude oil
production and rising demand for light distillates will boost the industry landscape. The Covid-
19 crisis caused a historic decline in global oil demand, the major projects saw delays due to
forced lockdown limitations across major part of the world. Thus saw the decline in oil & gas
demand due to the travel restrictions from the end user and industrial facilities affecting the oil &
gas utilization across the world.

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 TABLE OF CONTENTS

Sr.no Particular Page No.

1 Chapter 1 - Introduction to project 7

 Objectives of the study 8

 Limitations of the study
 Research Methodology
2 Chapter 2 – 9
 Pestle
 PORTERS RAMEWORRK 12
3 Abou the company 14
 Vision / mission
 Swot
4 Chapter 3 – Company History 15
 7-s framework 18
 Ansoff matrix 22
5 Chapter 4 - Introduction To Management Concept - 24
Fundamental & Technical Analysis

6 Financial ratios 31-34

7  Conclusion 37
 Recommendations

8  Refrences 38

CHAPTER 1:

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1.1INTRODUCTION TO PROJECT
Considered being the biggest sector in the world in terms of dollar value,the production,
distribution, refining, and retailing of petroleum taken as a whole represents the world's largest
industry in terms of dollar value.
Oil & gas storage market size valued at nearly USD 22 billion in 2021. Ongoing utilization of
oil and natural gas facilities and improvement of storage activities owing to the rising demand
of the natural gas in multiple application will influence the industry growth. Increasing
requirement for refined petroleum products including fuel oil, diesel fuel, kerosene, gasoline,
liquified petroleum gas and liquified natural gas will positively impact the market demand.

Oil is crucial to the global economic framework, impacting everything from transportation to
heating & electricity to industrial production & manufacturing.

It is formed from the accumulation of decomposition of plants and marine animals which
died million years ago and trapped beneath the ground under high pressure and temperatures.
Oil & gas compound consist of Carbon & Hydrogen Atom, that’s why it is called
HYDROCARBON. Crude Oil is liquid while Natural Gas is gaseous hydrocarbon at room
temperature. Dead organism get trapped underground High Temperature & Pressure
transform buried dead organism into oil & gas Oil & gas is also called PETROLEUM which
means “Rock Oil” in Latin word.
THE DIFFERENT OIL AND GAS SECTORS
The sector has three key areas: Upstream, midstream and downstream.

 What is upstream? - Upstream is E&P (exploration and production). This involves the
search for underwater and underground natural gas fields or crude oil fields and the
drilling of exploration wells and drilling into established wells to recover oil and gas.
 What is midstream? - Midstream entails the transportation, storage, and processing of
oil and gas. Once resources are recovered, it has to be transported to a refinery, which is
often in a completely different geographic region compared to the oil and gas reserves. 
Transportation can include anything from tanker ships to pipelines and trucking fleets. 

 What is downstream? - Downstream refers to the filtering of the raw materials obtained
during the upstream phase. This means refining crude oil and purifying natural gas. The
marketing and commercial distribution of these products to consumers and end users in a
number of forms including natural gas, diesel oil, petrol, gasoline, lubricants, kerosene,
jet fuel, asphalt, heating oil, LPG (liquefied petroleum gas) as well as a number of other
types of petrochemicals.

Oil is the Major Energy Source Throughout the World When transformed into petroleum, it is a
key energy source used in vehicles, planes, heating, asphalt, and electricity. Outside of being a

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crucial energy source, petroleum is used in plastics, paints, chemicals, tape, and so much more.
It's hard to imagine a world without oil.

Oil and natural gas touch our lives in countless ways every day Oil and natural gas combined
provide over half of the world's energy. Oil and natural gas are necessary resources. A lack of oil
and natural gas would have the country (and the world) grinding to a halt.
Though there have been “renewable” and “sustainable” energy initiatives, none of them have
been able to contribute a significant amount of energy to the world. They have either been
prohibitively expensive, difficult, or simply unreliable. Oil and natural gas runs the world, and
without it many countries would not be able to sustain their daily operations. 

Oil accounts for approximately 3% of GDP and is one of the most important commodities in the
world – petroleum products can be found in everything from personal protective equipment,
plastics, chemicals and fertilisers through to aspirin, clothing, fuel for transportation and
even solar panels.
Every year, the oil and gas industry pays billions of dollars in taxes to governments. Another
way governments – and their citizens – benefit financially from the oil and gas industry is
through royaltieS. Taxes and royalties help pay for important government services, such as
education, health care and infrastructure that benefit everyone living in a country
Finally, the investment that oil and gas companies make, supports job and businesses  provides
lower energy costs for consumers, and ensures our energy security.

Demand for oil plunged in 2020 during the pandemic when lockdowns led the price to fall below zero
first time in history due to a major downturn in economic activity.
Oil prices have since risen sharply to nearly $100 per barrel following strong economic recovery post-
lockdowns. As the economy grows so does the demand for oil. Moreover, rising geopolitical tensions
between Russia and Ukraine and in the Middle East are stoking supply fears. This is contributing to
rising inflation and concerns about economic recovery.

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The largest petroleum producer of the Organization of Petroleum Exporting
Countries (OPEC) and one of the leading oil exporters in the world, Saudi
Arabia has reserves that represent one-fourth of the world total
OPEC is an acronym for the Organisation of the Petroleum Exporting
Countries, which is an intergovernmental organisation consisting of
fifteen nations that was founded in 1960 by the first five members
(Iran, Iraq, Kuwait, Saudi Arabia and Venezuela) in Baghdad. The
headquarters of the organisation has been in Vienna, Austria since
1965. Estimates, released in September 2018, claim that 44% of
global oil production and 81.5% of the world’s ‘proven’ oil reserves are
accounted for by OPEC.

SAUDI ARABIA AND OIL

 Oil was first struck in Saudi Arabia in March 1938, at a depth of 1,440 metres in the Dammam oilfield.
Saudi Arabia possesses around 17 per cent of the world’s proven petroleum reserves. Apart from petroleum, the
Kingdom’s other natural resources include natural gas, iron ore, gold, and copper.


 The Middle East presently produces about a third of the world's oil. Oil production in
the Middle East amounted to roughly 28.2 million barrels per day in the year
2021. This represents an increase of nearly two percent in comparison to the
previous year. The Middle East accounts for 31.3 percent of the global oil
production.
 Many of the largest oil producers are in the Middle East, including
Saudi Arabia, UAE, and Iraq.
 Saudi Arabia is the world's largest oil producer and accounts for
roughly 15% of global output.

Saudi Arabia is home to the world’s biggest crude exporter, pumps from the
largest oil field on the planet, and holds the keys to one of the most abundant
reserves of black gold globally. Now Saudi Aramco is kicking off what could be
the world's largest share sale

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Saudi Arabia possesses approximately 17 percent of the world’s proven
petroleum reserves and ranks as one the largest net exporters of petroleum.
Saudi Arabia has the second-largest proven oil reserves in the world.  Saudi
Aramco, one of the world’s largest integrated energy and chemicals
companies, operates along two major segments: Upstream and Downstream.
In 2020, Aramco’s average hydrocarbon production was 12.4 mmbpd,
including 9.2 mmbpd of crude oil.  In comparison, Aramco’s average
hydrocarbon production in the first half of 2021 was 11.6 mmbpd, of which
8.6mmbpd is attributed to crude oil production. As OPEC+ has slowly raised
quotas, Saudi Arabia’s output has followed suit; as of June 2022, Saudi
Arabia was producing 10.3mmbpd of crude oil.    Following the economic
downturn and volatile oil prices seen in 2020, oil prices rebounded in 2021
and have continued to increase in 2022.  Saudi Arabia is reinvesting this
windfall into its Vision 2030 economic diversification program.  In line with
Saudi Arabia’s announcement at its Saudi Green Initiative forum last fall to
achieve net-zero emissions by 2060, Aramco has committed to an ambitious
target of net-zero emissions by 2050.

Oil and natural gas are major industries in the energy market and play an influential role in the global
economy as the world’s primary fuel sources. The processes and systems involved in producing and
distributing oil and gas are highly complex, capital-intensive, and require state-of-the-art technology.
Historically, natural gas has been linked to oil, mainly because of the production process or upstream side
of the business.
Oil and gas business sector has really been showing its growth every day. It plays a very important role in
economic and political scenario of the world.
The high economic growth in last few years, increasing industrialization coupled with a burgeoning
population has created a lot of concern of India’s energy scenario. India has 0.5% of Oil and Gas
resources of the world and 15% of the world’s population. The present national production/consumption
ratio for India is 0.26. The consumption of natural gas grew at a CAGR of 1.8 per cent in the period 2000-
2010 supported by rise in availability through domestic and imported sources of gas. This makes India
heavily dependent on import of crude oil and natural gas. India met 80 per cent of its crude oil demand
through imports. The domestic production of crude oil has been in the range of 32-34 MMT over the past
few years. About 70 per cent of its crude imports are from the Middle East.

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1.2OBJECTIVE OF THE RESEARCH

To study and analyze Aramco company using the company analysis

To study fundamental analysis with specific reference to oil and gas industry

To understand commercial performance of the company

Understanding the challenges and overcoming those through SWOT

1.3 LIMITATION OF THE STUDY

The analysis is done only on secondary data as collecting of primary data is not
feasible

Market dynamics are volatile considering eco-political scenario which affects the
company performance

Restudy of the implications of the fundamental and technical analysis might be

skewed due to volatile economic-political situation in ---country which is the major
market.

1.4 RESEARCH METHODOLOGY

The data for the company named ARAMCO was collected through several
websites in which authentic data were presented in the following websites:

• Yahoo Finance

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 • Official website of ARAMCO

Scope

Oil and gas are two of the most heavily traded commodities inthe world, and
transporting them is always a critical businessaction because of their value. A
single oil tanker may carry2 million barrels or more of crude oil worth US$80
million.Using massive marine tankers, barges, and pipelines, midstreamand
primary supply traders and schedulers move huge, bulkquantities of oil and gas
every day – crude oil and natural gasfrom production fields to refineries, and
refined products fromrefineries to storage terminals. Oil shipments can last
manyweeks and involve hundreds of thousands – even millions – of barrels of oil products.

Saudi Aramco’s operations span the globe. The company isthe world leader in
crude oil production, with the capacity toproduce 10 million barrels a day to satisfy
10% of world demand.Saudi Aramco owns and operates an extensive network
ofrefining and distribution facilities and is also responsible for gasprocessing and
transportation. An array of internationalsubsidiaries and joint ventures, including
one of the world’slargest fleets of supertankers, deliver crude oil and
refinedproducts to customers worldwide.For Saudi Aramco, efficient operations go
far beyond runninga large, successful, and profitable business. The company has
afar-reaching impact on the global economy as a whole

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CHAPTER 2

PESTEL ANALYSIS

This detailed ‘PESTEL analysis of the oil and gas (petroleum) industry’ examines how different
macro factors shape the direction and the activities of the global oil and gas industry. PESTLE
analysis is a framework which is imperative for companies such as ONGC, as it helps to
understand market dynamics & improve its business continuously. PESTLE analysis is also
referred to as PESTEL analysis.  A PESTLE analysis is centered around the political, economic,
social and technological, environmental, and legal factors of a business.

POLITICAL:

The threats for the business of oil and gas companies which are influenced by political factor and
decisions are many Geopolitical conflicts , Political Instability.
Sadly, the oil and gas industry is heavily influenced by politics. This has a major effect on the
overall global oil price and supply, which the world heavily relies on as a fossil fuel burning
planet. Politically this can cause numerous tensions between countries. A prime example is the
tensions between Iran and the US. Such tensions, and similar, cause an increase in terrorist
attacks and even wars, which have spiked since the 9/11 attacks

Governments also have great influence on the oil and gas industry. This is as a result of the huge
profits that can be made and control that can be asserted over this asset, especially if it is
produced locally. Many countries will keep control of this asset through legal frameworks,
contract enforcement, pricing regulations, taxes and Industrial safety.

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ECONOMIC:

The connection between petroleum industry and the global economy is significantly important
and for that reason are heavily interact each other. It is known that global economic growth
drives the global consumption of oil and gas.

As the oil price starts to rise () the top oil producing countries in the world; USA, Russia, Saudi,
Iraq etc feed the top oil consuming countries, USA, China, India, Japan etc (Aljazeera, 2021).

Any economic decline in any of these countries usually has an impact on the oil and gas industry.
For instance, oil prices fell in the first week of August 2021 as the growth in factory activity in
China slipped sharply (Aljazeera, 2021). The oil and gas industry also supports jobs globally.
High oil prices means more recruitment and many more in jobs, however, it impacts other
industries negatively as oil prices push fuel prices up. A countries inflation will also impact this
as fuel prices rise in line with other domestic goods and services.

SOCIAL:

These factors express migration, culture, religion, demography, income and ideological views on an
issue. Some current social trends and beliefs that can affect significantly the oil and industry are:
Increasing awareness and focus on more friendly fuels and decreasing in the use of “dirty” fossil fuels
such as oil sands, coal, and shale gas.

The Oil and Gas industry is going through a huge change as it progresses the ‘Energy
Transition’, this has only brought it’s [negative] image back to the forefront as a huge polluter.
This image effects everything! This image is being exploited by many of the big oil companies
as they promote their move to greener, renewable energy.

Cultural trends are being affected [even before the energy transition] as developing countries see
an increase in their population buying automobiles. On the flip side, many cultural trends are
pushing toward greener, renewable energy and so customer buying trends are shifting to electric
cars, greener energy (solar, wind).

TECHNOLOGICAL:

When talked about the technological factors, it means these are about different technologies,
techniques and the ways than can affect the activities, which are being undertaken in an
organization. It can also influence the organization with the need to get modern technology. Such
latest technologies are used for the exploration of oil and gas and use roads, pipelines, transport

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and oil tanks. The second technologies are used in giving protection to environment, workers,
and enhance the efficiency of management with the use of new software and hardware.

The main barriers that oil and gas industry face in bringing a new technology or innovation to the
market are- Regulations too stringent, The cost of development. Uncertainty over time to get to
market Insufficient funding Uncertainty over oil and gas prices, Uncertainty over returns, skill
Shortages.

ENVIRONMENTAL:

The geographic position of the oil reserves and refinery has great influence on the activity of the
oil companies. The latest report of OPEC shows that most of the natural oil and petroleum is
produced in the countries like Saudi Arabia, Kuwait, Libya, Russia, US, Venezuela, Iran,
Canada, UAE, Nigeria, China, Qatar, Algeria, Mexico and many more and they have to face the
natural disasters of earthquakes, sand storms, hurricanes, cyclones, snow storm, tsunami, hot
temperature and volcanic eruption and such incidents affected the economic situation in the
country.

When the investors make their investment in the oil and petroleum industry, they should
understand macro-environment. It is necessary to use oil and petroleum in the industry but the
use of oil and gas products remain necessary, so the government and concerned departments
should ensure strict regulations for the use of oil and gas to combat with the negative effects of
oil and gas industry. They should design the structure to utilize these resources in preventive and
safe manner.

LEGAL:

In the legal factors, the formation of laws, rules and regulations of concerned department,
governments and the international organizations and communities including European Union,
African Union, North American Free Trade Agreement, ASEAN are included. The legal factor
influences the exploration, exploitation, and the commercialization of oil products. This industry
has to face some legal positions like work regulation, work protection, social protection,
competition regulation, pollution, international trade and consumer protection. The industry has
to pay the subsidies, taxes for fuels and oil prices.

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PORTER’S FRAMEWORK

Porter's Five Forces of Competitive Position Analysis were developed in 1979 by Michael E
Porter of Harvard Business School as a simple framework for assessing and evaluating the
competitive strength and position of a business organisation.

This theory is based on the concept that there are five forces that determine the competitive
intensity and attractiveness of a market. Porter’s five forces help to identify where power lies in a
business situation. This is useful both in understanding the strength of an organisation’s current
competitive position, and the strength of a position that an organisation may look to move into.

Saudi Aramco Oil Company has actually gotten a number of business that assisted it in
diversification and growth of its item's profile. This is the thorough explanation of the Porter's
design of 5 forces of Saudi Aramco Oil Company Business, given in Exhibit B.

Competitiveness
Saudi Aramco Oil Company is one of the top company in this competitive market with a number
of strong rivals like Unilever, Kraft foods and Group DANONE. Saudi Aramco Oil Company is
running well in this race for last 150 years. The competitors of other companies with Saudi
Aramco Oil Company is rather high.

Threat of New Entrants

A number of barriers are there for the brand-new entrants to take place in the consumer food
industry. Just a few entrants prosper in this industry as there is a need to understand the customer
need which requires time while current rivals are aware and has progressed with the consumer
commitment over their products with time. There is low danger of new entrants to Saudi Aramco
Oil Company as it has quite big network of circulation internationally dominating with well-
reputed image.

Bargaining Power of Suppliers

In the food and beverage market, Saudi Aramco Oil Company owes the biggest share of market
requiring greater number of supply chains. In reaction, Saudi Aramco Oil Company has likewise
been worried for its suppliers as it believes in long-term relations.

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Bargaining Power of BuyersThus, Saudi Aramco Oil Company makes sure to keep its
consumers satisfied. This has led Saudi Aramco Oil Company to be one of the faithful business
in eyes of its purchasers.

Threat of Substitutes
There has been an excellent risk of replacements as there are substitutes of a few of the Nestlé's
items such as boiled water and pasteurized milk. There has likewise been a claim that a few of its
products are not safe to use resulting in the reduced sale. Hence, Saudi Aramco Oil Company
began highlighting the health benefits of its items to cope up with the alternatives.

Competitor Analysis
It has actually ended up being the second largest food and beverage market in the West Europe
with a market share of about 8.6% with only a distinction of 0.3 points with Saudi Aramco Oil
Company. Saudi Aramco Oil Company attracts regional costumers by its low expense of the
item with the regional taste of the items keeping its first location in the worldwide market. Saudi
Aramco Oil Company business has about 280,000 staff members and functions in more than 197
countries edging its rivals in numerous regions..

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CHAPTER 3

3.1 COMPANY HISTORY IN BRIEF

Saudi Aramco is the world's largest oil producer. Officially known as Saudi Arabian Oil
Company, the company is primarily state-owned and is based in Dhahran, Saudi Arabia. It is the
world's largest oil producer and the world's profitable company. The company was established
in 1933 and began drilling in 1938

Saudi Aramco is engaged in prospecting, exploring, drilling, extracting, processing,

manufacturing, refining and marketing hydrocarbon substances within the Kingdom and has
interests in refining, petrochemical, distribution, marketing and storage facilities outside the
Kingdom.

Saudi Arabian Oil Co. engages in the exploration, production, transportation, and sale of crude
oil and natural gas. It operates through the following segments: Upstream, Downstream, and
Corporate. The Upstream segment includes crude oil, natural gas and natural gas liquids
exploration, field development, and production. The Downstream segment focuses on refining,
logistics, power generation, and the marketing of crude oil, petroleum and petrochemical
products, and related services to international and domestic customers. The Corporate segment
offers supporting services including human resources, finance, and information technology.

Saudi Aramco’s operations span the globe. The company is the world leader in crude oil
production, with the capacity to produce 10 million barrels a day to satisfy 10% of world
demand. Saudi Aramco owns and operates an extensive network of refining and distribution
facilities and is also responsible for gas processing and transportation. An array of international
subsidiaries and joint ventures, including one of the world’s largest fleets of supertankers, deliver
crude oil and refined products to customers worldwide. For Saudi Aramco, efficient
operations go far beyond running large, successful, and profitable business. The company has a
far-reaching impact on the global economy as a whole.

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HISTORY
Saudi Aramco was established following a concession agreement between the Saudi Arabian
government and the Standard Oil Company of California in 1933. The company began primary
drilling operations shortly after the agreement, commencing its first commercial oil production in
1938.3

The company expanded rapidly across Saudi Arabia over the next decade, reaching crude
oil production of 500,000 barrels per day in 1949. In order to keep up with production, the firm
built out its distribution pipeline and built the Trans-Arabian Pipeline - the longest in the world.

A major step in Saudi Aramco's move toward domination of the global oil markets came in 1960,
with the foundation of OPEC. The Organisation of Petroleum Exporting Countries combined the
world's major oil producers, excluding the USA and Russia, into a group designed to coordinate
oil production policy. OPEC is now seen as the most important organisation in the oil market,
with huge influence over prices.

In 1973, the Saudi Arabian government purchased a 25% interest in the company, gradually
increasing its stake to 100% in the late 1970s. The Saudi Arabian Oil Company was officially
established in the 1980s. Throughout the 1990s, it built global alliances and partnership deals.

3.2 TOP MANAGEMENT

Amin H Nasser President and CEO Of Saudi Aramco

Yasir Othman Al-Rumayyan Chairman of Saudi Aramco’s Board Of Directors
Khalid Al-Falih Board Chairman
Nabeel A. Al Mansour Senior Vice President, General Counsel
and Corporate Secretary
Nasir K. AI Naimi Senior Vice President
Mohammad M. AI Tuwaijri Director
Khalid H AI Dabbagh Director
Stuart T Gulliver Director
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 Amin H. Nasser is the president and chief executive officer of Saudi Aramco, the world’s
leading integrated energy and chemicals enterprise, and the largest provider of crude oil to
global markets . Nasser is actively engaged in the advancement of people through education
and training, and advancing the company’s innovation and technology strategy. 

 Yasir bin Othman Al-Rumayyan is a Governor of the Public Investment Fund, the sovereign
wealth fund of the Kingdom of Saudi Arabia. He also serves as the Chairman of English
football club Newcastle United and the Chairman of state-owned petroleum company
Saudi Aramco.

3.3.1 VISION
As per latest , Saudi Aramco is the world s leading integrated energy and chemicals company,
focused on maximizing income, facilitating the sustainable and diversified expansion of the
Kingdom s economy, and enabling a globally competitive and vibrant Saudi energy sector.

3.3.2 MISSION
“To achieve resilient value creation through crude oil cycles, capture value across hydrocarbon
chain and to become a leading integrated energy and chemicals company that focuses on the
maximization of income and facilitates sustainability and diversification of the expansion of the
kingdom’s economy.”

Latest events
 Saudi Aramco overtakes Apple as world’s most valuable company.
 Saudi Arabian Oil Company (“Aramco”) today signed a Memorandum of
Understanding (MoU) with China Petroleum & Chemical Corporation (Sinopec)
covering multiple areas of potential collaboration between the parties in Saudi Arabia
 Valvoline Inc (VVV.N) is selling its unit that makes lubricants, coolants and other
automotive products to state-owned Saudi Aramco for $2.65 billion in cash to sharpen
focus on its retail services business

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SWOT ANALYSIS OF SAUDI ARAMCO
SWOT Analysis of one of the best methods that Saudi Aramco can use to find out its internal
Strengths and Weaknesses and external Opportunities and Threats. SWOT Analysis helps Saudi
Aramco to find out where it stands in the market by giving it an overview of its business.
.
Strengths of Saudi Aramco
Strengths are the most important factor that helps Saudi Aramco to maintain its position in the
market. Following are some of the strengths of Saudi Aramco:
 Large Production and Refining capacity – Saudi Aramco has a large capacity for
production and refining its materials. This helps the company to serve a large audience in
the market with its products.
 Advancement in Technology – Saudi Aramco uses the latest technology in the
production and management of its products. This helps it to be efficient in its process and
in return get more production.
 Low Price – the cost per production of a barrel of Aramco is one of the lowest in the
market all over the world. Thus, this helps it to enjoy the advantages of a low-cost
environment.
 
Weaknesses of Saudi Aramco
Weaknesses are the factors that act as a flaw in the growth of Saudi Aramco. It needs to find
these flaws in its company and try to fix them as soon as possible. Following are some of the
weaknesses of Saudi Aramco:
 High dependability on only one product – Saudi Aramco is more dependent on the
profitability of only one of its products which are crude oil. If this goes on them the
company may face trouble in the future if any changes occur in the profitability of that
product.
 Corporate Governance and Transparency – Saudi Aramco faces a large disadvantage
due to corporate governance and transparency.

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Opportunities for Saudi Aramco
Opportunities are the factors that help Saudi Aramco grow exponentially in its industry. The
company needs to find such opportunities that can be helpful to it and make them their strengths.
Following are some of the opportunities for Saudi Aramco:

 Global economic growth – Due to the increase in the demand for energy and increasing
dependency on fuels it can be an opportunity for Saudi Aramco to grow in its field.
 Saudi Aramco’s IPO – The release of the initial public offering of Saudi Aramco will
help in bringing out the real valuation of the company. This will ensure more financial
and operational transparency for the company.
 

Threats to Saudi Aramco

Threats are the external factors of Saudi Aramco that affect the growth of the company in a
negative way. It needs to be aware of such events in the future and be prepared with proper
precautionary measures. Following are some of the threats to Saudi Aramco:
 Exploration of new products – The global market share of Saudi Aramco can decrease
if other countries are successful in the exploration of new products. This will result in a
threat to Saudi Aramco.
 Eco-friendly fuel – If the dependability on renewable energy and non-conventional
sources of energy increases then the company may face a large drawback as their
products are not environment friendly.

With this, we come to an end of the SWOT Analysis of Saudi Aramco. This analysis helps the
company to grow in the market by analyzing its position in the market and giving a wide idea.

22
7-S FRAMEWORK
The McKinsey 7S Model refers to a tool that analyzes a company’s “organizational design.” The
goal of the model is to depict how effectiveness can be achieved in an organization through the
interactions of seven key elements – Structure, Strategy, Skill, System, Shared Values, Style, and
Staff..

1.Strategy
Competitive pressures Saudi Aramco A State Within a State’s strategy also takes into
consideration the competitive pressures and activities of competitors. The strategy addresses
these competitive pressures through suggestive measures and actions to address competition via
strategic tactics and activities that ensure sustainability to Saudi Aramco A State Within a State
via adapting to market changes, and evolving consumer trends and demands.

1.1.1. Clearly defined 

The strategic direction and the overall business strategy for Saudi Aramco A State Within a State
are clearly defined and communicated to all the employees and stakeholders. This helps the
organization manage performance, guide actions, and devise different tactics that are aligned
with the business strategy. Moreover, the business strategy’s definition and communication also
make operations for Saudi Aramco A State Within a State more transparent and aligns the
responsibilities and actions of the company.

2.Structure
Organizational hierarchy
Saudi Aramco A State Within a State has a flatter organizational hierarchy that is supported by
learning and progressive organizations. With lesser managerial levels in between and more
access to the senior management and leadership, the employees feel more secure and confident
and also have higher access to information. Moreover, the flatter hierarchy also allows quicker
decision-making processes for Saudi Aramco A State Within a State and increases organizational
commitment in the employees.

 Communication 
Saudi Aramco A State Within a State has a developed and intricate system for ensuring
communication between employees, and different managerial levels. The communication
systems at Saudi Aramco A State Within a State enhance the overall organizational structure.
The systematic, defined, and organized communication allows an easy flow of information and
ensures that no organizational tasks and goals are compromised because of a lack of
communication, or misunderstandings. 

23
3.Systems
1.3.1. Organizational systems in place
Saudi Aramco A State Within a State has defined and well-demarcated systems in place to
ensure that the business operations are managed effectively and that there are no conflicts or
disputes. The systems at Saudi Aramco A State Within a State are largely departmental in nature,
and include, for example:

-  Operations

- Sales

- Supply chain management

- Public Relation Management

Human resource management

- Finance

- Marketing

- Operations

- 1.3.2. Defined controls for systems

Each of the defined and demarcated systems at Saudi Aramco A State Within a State has
especially designed tools and methods as controls for evaluating performance and goal
attainment. These controls and measures are designed specifically in different departments based
on the nature of their tasks and responsibilities. Moreover, each department also designs specific
controls for members for performance evaluation, as well as for inter-departmental tasks and
responsibilities.

4.Shared values 
2.1.1. Core values
The core values at Saudi Aramco A State Within a State are defined and communicated to foster
a creative and supportive organizational structure that will allow employees to perform
optimally, and enhance their motivation and organizational commitment. The core values at
Saudi Aramco A State Within a State include, but are not limited to:

 -Trust

24
- Quality

- Creativity

- Honesty

- Transparency

- Accountability

. Corporate culture
Saudi Aramco A State Within a State encourages an inclusive culture that celebrates diversity.
The company has an international presence, and production units that are spread across different
countries, as such, Saudi Aramco A State Within a State ensure that its organizational culture is
supportive of diversity, and has internal policies to reduce incidences of discrimination.

The corporate culture at Saudi Aramco A State Within a State also encourages innovation and
creativity by allowing independence for growth to individuals and teams –thus helping them
refine their careers as well as personalities. Lastly, the corporate culture at Saudi Aramco A State
Within a State also has a supportive leadership which works towards increasing employee
motivation and job satisfaction by giving way to visibility and accessibility.

5. Style 
2.2.2. Effectiveness of leadership style
The participative leadership style is highly effective in achieving the business goals and vision of
the organization. Employees feel to be active members of the organization who are valued for
their suggestions, feedback, and input. Moreover, through participative leadership, leaders and
managers are able to identify current and potential conflicts within the Saudi Aramco A State
Within a State organization, and actively work to resolve them as soon as possible.

2.2.1. Management/leadership style

Saudi Aramco A State Within a State has a participative leadership style. Through a participative
leadership style, Saudi Aramco A State Within a State is able to engage and involve its
employees in decision-making processes and managerial decisions. This also allows the
leadership to regularly interact with the employees and different managerial groups to identify
any potential conflicts for resolution, as well as for feedback regarding strategic tactics and
operations. Through its participative leadership, Saudi Aramco A State Within a State is able to
enhance employee motivation, and increase organizational commitment and ownership amongst
employees as well as other stakeholders.

25
6. Staff

2.3.1. Number of employees

Saudi Aramco A State Within a State has employed a large number of employees. The number
of employees varies from country to country as per the requirements and needs of the business
and operations. The global team of Saudi Aramco A State Within a State is an inclusive one that
accepts, and encourages diversity, and works in synchronization with members to ensure
attainment of business goals. The team member sand employees are the most important part of
business success for Saudi Aramco A State Within a State.

2.3.2. Employee skill level vs business goals

Saudi Aramco A State Within a State has a sufficient number of employees employed across its
global operations. Employees for different job roles and positions are hired internally as well as
externally – depending on the urgency and the skill levels required. Based on this, it is seen that
Saudi Aramco A State Within a State has employees who are skilled as per the requirements of
their job roles and positions. All employees are given in house training to familiarize themselves
with the company and its values. External training along with in-house training is provided for
skill level enhancement.

7. Skills
2.4.3. Skill management
Saudi Aramco A State Within a State pays particular attention to enhancing the skills and
capacities of its employees. It arranges regular training and workshops – internally as well as
externally managed- to provide growth and development opportunities for its employees. Saudi
Aramco A State Within a State focuses on personal as well as professional growth for its
employees and works accordingly with them.

2.4.1. Employee skills

Saudi Aramco A State Within a State has a commendable workforce, with high skills and
capacities. All employees are recruited based on their merit and qualifications. Saudi Aramco A
State Within a State prides itself on hiring the best professionals and grooming them further to
facilitate growth and development.

26
ANSOFF MATRIX

The Ansoff Matrix, often called the Product/Market Expansion Grid, is a two-by-two framework
used by management teams and the analyst community to help plan and evaluate growth
initiatives. The Ansoff matrix offers four strategic choices to businesses to choose from – market
penetration, market development, product development and diversification. An organization or a
business is to choose any of these four strategies, or a combination – deepening on various
internal and external factors.

Market penetration

The market penetration strategy is used by businesses that seek growth for existing products in
markets where their brands are existing, and already operational.

 increased production capacity will allow The Oil and Gas Industry to reach more
customers within the same market.

 With higher marketing investment, the

 Oil and Gas Industry will be able to increase its market penetration within the existing
markets for existing products.

 The Oil and Gas Industry can also increase its investment in marketing and advertising
activities to increase market penetration.

Market development

Market development is the name given to a growth strategy where the business seeks to sell its
existing products into new markets. By this the Global Oil and Gas Industry can enhance its
business growth through introducing existing products in new markets by following
strategies-

 The Oil and Gas Industry should invest in research and development to identify possible
new markets and consumer segments for its products.

 The Oil and Gas Industry can also explore new consumer segments in the same market
for its products.

 The Oil and Gas Industry should also educate consumers in new markets for its products.

27
Product development

Product development is the name given to a growth strategy where a business aims to introduce
new products into existing markets. This strategy may require the development of new
competencies and requires the business to develop modify products which can appeal to existing
markets.

The industry drives product development in different ways.

 The Oil and Gas Industry can introduce modifications and improvements in existing
products to offer consumers new and enhanced offerings.This will lead to increased sales
and consumption of the product.

 The oil and Gas Industry can regularly invests in research and development – especially
pertaining towards understanding market trends and consumer behavior.

Diversification

Diversification is the name given to the growth strategy where a business markets new products
in new market. This is an inherently more risk strategy because the business is moving into
markets in which it has little or no experience.

 Diversification is an important and allows businesses like the Oil and Gas Industry to
remain competent, innovative, and competitive.

 Henceforth any company under Oil and Gas sector therefore requires coming up with
ideas of expectations and assessing the potential risks that are associated with the
undertaking.

(Muspratt, 2019) talked  about the three key sectors in oil and gas, the current state of the
industry and future outlook.

(adamkasi, 2016)

Pestle analysis

Solare (2007) conduct a study on the future challenges of the Saudi company which is known
as Aramco and very famous worldwide. It is projected that in the next 5 years, most scientists,

28
engineers, and professionals will leave the petroleum business, putting the petroleum sector in a
precarious position

Saudi Aramco is engaged in prospecting, exploring, drilling, extracting, processing,

manufacturing, refining and marketing hydrocarbon substances within the Kingdom and has
interests in refining, petrochemical, distribution, marketing and storage facilities outside the
Kingdom. Saudi Aramco’s operating segments are established on the basis of those components
that are evaluated regularly by the CEO, considered to be the Chief Operating Decision Maker.
The Chief Operating Decision Maker monitors the operating results of Saudi Aramco’s operating
segments separately for the purpose of making decisions about resource allocation and
performance assessment. Segment performance is evaluated based on revenues, costs and a
broad range of key performance indicators in addition to segment profitability. For management
purposes, Saudi Aramco is organized into business units based on the main types of activities. At
December 31, 2019, Saudi Aramco had two reportable segments, Upstream and Downstream,
with all other supporting functions aggregated into a Corporate segment. Upstream activities
include crude oil, natural gas and natural gas liquids exploration, field development and
production. Downstream activities include the refining, logistics, power generation, and
marketing of crude oil, petroleum and petrochemical products and related services to
international and domestic customers. Corporate activities include primarily supporting services
including Human Resources, Finance and IT, not allocated to Upstream and Downstream.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to
transactions with third parties.

To conclude the overall analysis of the ARAMCO. First, the company values were discussed,
then the financial analysis was done with the help of financial ratios. ARAMCO has performed
almost every year by maintaining high ratios and high-profit margins. The company has
competitors operating in the same market as Saudi Arabia. Besides these, the investments and
earning of the company is also used for military, and social purposes as well as princes living
is also expenses by the company. Therefore, the company has a bright future in the country by
having more than average revenues

29
CHAPTER 4
INTRODUCTION TO MANAGEMENT CONCEPT

FUNDAMENTAL & TECHNICAL ANALYSIS

INTRODUCTION TO FUNDAMENTAL ANALYSIS

Fundamental analysis is basically done for long term and mid-term investment which is also
called as delivery-based investment trading. The main important aim behind is to study and

30
understand the company in which you are planning to invest your earned money and get
excellent returns.
Fundamental analysis is the method of evaluating securities by attempting to measure the
intrinsic value of a particular stock. It is the study of everything from the overall economy and
industry condition, to the financial condition and management of specific companies that is using
real data to evaluate a stock’s value. The method utilizes items such as revenue, earnings, return
on equity and profit margins to determine a company’s underlying value and potential for future
growth.
Fundamental analysis is really a logical and systematic approach to estimating the future
dividends and share price. It is based on the basic premise that share price is determined by a
number of fundamental factors relating to the economy, industry and company. Hence, the
economy fundamentals, industry fundamentals, and company fundamentals have to be
considered while analysing a security for investment purpose. Fundamental analysis is, in other
words, a detailed analysis of the fundamental factors affecting the performance of companies.
Fundamental analysts consider a company’s financial positions and performance, the market in
which it operates, competitors and the economy. The most important source of data for
fundamental analysis is the company’s financial statements. These include the income statement,
balance sheet and cash flow statements.

Data from these statements can be used to calculate ratios and metrics that reflect the company’s
performance, health and growth rates. Industry data and economic factors, like interest rates and
retail spending, are also used to forecast future growth rates. Ultimately, a fair value is arrived at
after comparing several models and ratios.

Advantages & Disadvantages of Fundamental Analysis:

Advantages of Fundamental Analysis:


1. Fundamental Analysis is a good tool for long-term investments that try to achieve a
growth of capital as it will help to identify assets that represent a good value in longer-
term investment.

 2. One of the most notable but less obvious rewards of fundamental analysis is the
development of solid understanding of the business and industry due to the in-depth,
extensive research and analysis required to conduct fundamental analysis.

Disadvantages of Fundamental Analysis:

 There are also several drawbacks to fundamental analysis. It’s important to be realistic
about its limitations. Fundamental analysis is time consuming – each company must be
31
 studied independently and in detail. Most of the information used in fundamental analysis
is widely available. To gain an edge with fundamentals, you need to find unique
datasets that aren’t available to most investors.
 Fundamental analysis tells you very little about what might happen in the short term.
Short term price movements and volatility cannot be forecast by looking at financial
statements. Fundamental analysis is a lot less precise than often perceived. Valuation
models like the discounted cash flow model are based on numerous assumptions which
are seldom very accurate. Target valuations can be useful on a relative basis but are
limited when it comes to valuing a company more than one or two years into the future.

LITERATURE REVIEW

A literature review is a comprehensive summary of previous research on a topic. The literature
review surveys scholarly articles, books, and other sources relevant to a particular area of
research. The review should enumerate, describe, summarize, objectively evaluate and clarify
this previous research.

(Muspratt, 2019) talked about the three key sectors in oil and gas, the current state of the
industry and future outlook.

(adamkasi, 2016) In analysis explore Saudi Aramco (SA) Company, which is one of the world's

most renowned and valuable oil companies.

Solare (2007) conduct a study on the future challenges of the Saudi company which is known
as Aramco and very famous worldwide. It is projected that in the next 5 years, most scientists,
engineers, and professionals will leave the petroleum business, putting the petroleum sector in a
precarious position.

IvyPanda. (2022, June 21). Market Study and Market Intelligence for Saudi Aramco. Saudi
Aramco is a knowledge-based organization. Its important assets are the human resource, and the
vast resources composed of thousands of oil wells which number has remained a secret to the
eyes of its competitors and the general public.

Noel Maurer (2018), "Filling the Empty Quarter: Saudi Aramco and the World Oil Market
Harvard Business Review Case Study. Published by HBR Publications.

The efficiency of Financial Ratios Analysis for Evaluating Companies’ Liquidity. (2018).
32
International Journal of Social Sciences & Educational Studies.

Gately, D., Al-Yousef, N., & Al-Sheikh, H. H. (2012

FINANCIAL RATIOS

Financial ratios and their importance:

Assessment of financial performance and soundness is critical to any company. This gives the
general direction of a firm in assessing its strength and weakness in comparison to other peers in
the industry. Information obtained from financial ratios analysis is important not only to a firm's
manager but also relevant to stakeholders in making informed decisions.

Ratio analysis or in other terms financial ratios are evidenced to be used in calculating the
profitability and financial position of an organization. During the process of ratio analysis, the
organization concerned usually involves some parties that include the customers, the
management, owners of the firm, suppliers, competitors, and other relevant parties these
individuals are included with a view of applying the company's financial statements concerning
their evaluations

The main reason for the use of ratio analysis has been to understand the power of financial
institutions and also the shift in the management of the organization. This means that ratio
analysis was useful in understanding the credit approach and the managerial approach of the firm
concerning how it pays its debts.

This study is an assessment of Aramco company, by adopting financial ratios analysis. The data
is obtained from the company’s financial statements during 3 years.

Methodology and data

33
In table 1, all data of Aramco was gathered through official website of Saudi-Aramco. The data
was used to determine the ratios by computing the formulas. The ratios were measured only for
the past three years in which the financial activity of the company is analyzed.

All amounts in millions of Saudi Riyals unless otherwise stated*

Consolidated balance sheet is given on next page

Particulars Dec, 2020 Dec2019 Dec 2021

398,879 408,196 611241
 Total Current Assets
Cash and Short Term Investments 214,033 223,173 326652
Cash - -
Cash & Equivalents 207,232 177,706 299579
Short Term Investments 6,801 45,467 27703
Total Receivables, Net 114,078 130,307 181690
Accounts Receivables – Trade, Net 85,183 93,526 140373
Total Inventory 51,999 42,607 74703
Prepaid Expenses - -
Other Current Assets, Total 18,769 12,109 28196
1,914,261 1,494,126 2,161,690
 Total Assets
Property/Plant/Equipment, Total – Net 1,209,460 982,014 1244316
Property/Plant/Equipment, Total – Gross 1,862,474 - 1963887
Accumulated Depreciation, Total -653,014 - -719571
Goodwill, Net 100,204 - 100188
Intangibles, Net 64,343 30,122 60480
Long Term Investments 88,837 39,694 93720
Note Receivable – Long Term - -
Other Long Term Assets, Total 52,538 34,100 52745
Other Assets, Total -
243,211 215,571 303828
 Total Current Liabilities
Accounts Payable - -
Payable/Accrued 93,740 78,231 124689
Accrued Expenses - -
Notes Payable/Short Term Debt 60,316 0 17617
Current Port. Of LT Debt/Capital Leases 38,841 24,895 56933
Other Current liabilities, Total 50,314 112,445 104589
923,413 459,061 1049433
 Total Liabilities
Total Long Term Debt 436,920 150,690 436371
Long Term Debt 393,353 150,690 398263
Capital Lease Obligations 43,567 - 38108
Deferred Income Tax 53,621 44,471 74850

34
 Minority Interest 110,246 11,170 167411
Other Liabilities, Total 79,415 37,159 66973
990,848 1,035,065 1113257
 Total Equity
Redeemable Preferred Stock, Total - - -
Preferred Stock – Non Redeemable, Net - - -
Common Stock, Total 60,000 60,000 60000
Additional Paid-In Capital 26,981 26,981 26981
Retained Earnings (Accumulated Deficit) 901,330 951,834 1024582
Treasury Stock – Common -3,264 -3,750 -2828
ESOP Debt Guarantee - -
Unrealized Gain (Loss) 5,356 - 5769
Other Equity, Total 445 - -1247
1,914,261 1,494,126 2162690
Total Liabilities & Shareholders’ Equity
199,882.80 199,882.80 219817
Total Common Shares Outstanding

Following are the financial ratios that will be analyzed in this report :

 Ratios that are used to find the liquidity of ARAMCO

 Ratios that are used to find the leverage of ARAMCO
 Ratios that are used to derive the profitability of the company ARAMCO
 Measures to value the market status for the ARAMCO
 Ratios that determine the financial performance of ARAMCO

Current ratio

The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations or
those due within one year. Formula for calculating current ratio is current assets / current liabilities.

Current ratio of ARAMCO for year 3 years

2019 2020 2021

Current 408196 398879 611241
assets
Current 215571 243211 303828

35
 liabilities
Current 1.89 1.64 2.01
ratio

A good current ratio is between 1.2 to 2, which means that the business has 2 times more current
assets than liabilities to covers its debts. A current ratio below 1 means that the company doesn’t
have enough liquid assets to cover its short-term liabilities.

From the 4-year report, the

company has managed a
strong current ratio, which
implies its strong position
to meet
unpredicted demands of cash.
The highest figure was achieved
in 2018, which represented that
Nestle Company was able to
meet 95% of its short-term
obligations
From the 4-year report, the
36
company has managed a
strong current ratio, which
implies its strong position
to meet
unpredicted demands of cash.
The highest figure was achieved
in 2018, which represented that
Nestle Company was able to
meet 95% of its short-term
obligations
From the 3-year report, the company has managed a strong current ratio, which implies its strong
position to meet unpredicted demands of cash. The highest figure was achieved in 2021, which
represented that ARAMCO was able to meet 95% of its short-term obligations.

Debt-To-Equity Ratio
The debt-to-equity ratio is a financial ratio indicating the relative proportion of shareholders’ equity and
debt used to finance a company’s assets.

The ratio is used to evaluate ARAMCO’s equity in its financial statements by examining the
company’s overall debt figures.

37
The formula for calculating the debt-to-equity ratio is to take a company’s total liabilities and
divide them by its total shareholders’ equity.

2019 2020 2021

Total 459,061 923,413 1,144,055
liabilities
Total 1,035,065 990,848 1,197,350
shareholders’
equity
Debt -equity 2.25 0.93 0.95
ratio

Although it varies from industry to industry, a debt-to-equity ratio of around 2 or 2.5 is generally
considered good. This ratio tells us that for every dollar invested in the company, about 66 cents
come from debt, while the other 33 cents come from the company’s equity.
What constitutes a “good” debt-to-equity ratio depends on the company and the industry.
Typically, it’s best to have a debt-to-equity ratio below 1.0, though, you should at least aim for
below 2.0. As expected, the lower your debt-to-equity ratio, the better. When you have a low
debt-to-equity ratio, your company has lower liabilities compared to its assets.

Profitability ratio
Profitability ratio is used to evaluate the company’s ability to generate income as compared to its
expenses and other cost associated with the generation of income during a particular period. This
ratio represents the final result of the company.
ARAMCO’s profitability is measured by net profit margin. . The profit margin compares a
company’s performance to that of its competitors in the market.

Net Profit Margin is calculated using the formula =>

Net Profit Margin = (Net Income / revenue )* 100.
Return on asset =Net income/total assets
ROE= Net income/total equity
2019 2020 2021

38
 Net income 330,693 183763 412396
Total 1,105,696 768,109 1,346,930
revenue
Net Profit 29.9 23.9 30.6
margin
Total 1,494,126 1,914,261 2,162,690
assets
Total 1,046,235 1,101,094 1,280,668
equtiy
ROE 0.31 0.166 0.32
ROA 0.22 0.095 0.190

The net profit margin, or simply net margin, measures how much net income or profit is
generated as a percentage of revenue. It is the ratio of net profits to revenues for a company or
business segment.
Return on equity is measured by dividing net income over equity to analyze how efficiently a
company is making money from the equity investments. One cannot declare a particular range of
ROE as a good return on equity. For some industries, an ROE of more than 25% is desirable,
while for others more than 15% maybe considered exceptional.
Besides, the return on asset ratio measures the company’s net income to its total assets. As for
ARAMCO, their return on asset ratio increased the most in 2021.
In 2021, ARAMCO had increased their net profit margin.

Liquidity Ratio
A liquidity ratio is a type of financial ratio used to determine a company's ability to pay its short-
term debt obligations.
The quick liquidity ratio is the total amount of a company's quick assets divided by the sum of its
net liabilities and reinsurance liabilities.

Under this subsection, we shall

analyze three components-
Current ratio,

39
Cash ratio, and Quick ratio and
evaluate the position of Nestle
Company
Under this subsection, we shall
analyze three components-
Current ratio,
Cash ratio, and Quick ratio and
evaluate the position of Nestle
Company
Under this subsection, we shall
analyze three components-
Current ratio,
Cash ratio, and Quick ratio and
evaluate the position of Nestle
Company
40
Under this subsection, we shall
analyze three components-
Current ratio,
Cash ratio, and Quick ratio and
evaluate the position of Nestle
Company
Under this subsection, we shall
analyze three components-
Current ratio,
Cash ratio, and Quick ratio and
evaluate the position of Nestle
Company
Under this subsection, we shall analyze 3 components – Current ratio, Cash ratio, Quick ratio
and evaluate the position of the company.
Current Ratio = Current Assets / Current Liabilities
Cash Ratio = Cash + Cash Equivalent/Total Current Liabilities
Quick Ratio = Current Assets – Inventories /Current Liabilities

41
 2019 2020 2021
Current assets 408,196 398,879 611,241
Inventories 42,607 51,999 74,703
Current liabilities 215,571 243,211 303,828
Cash & cash 177,706 207,232 299,579
equivalent
Current ratio 1.89 1.64 2.011
Cash ratio 0.824 0.85 0.98
Quick ratio 1.69 1.42 1.76

A good liquidity ratio is anything greater than 1. It indicates that the company is in good
financial health and is less likely to face financial hardships. The higher ratio, the higher is the
safety margin that the business possesses to meet its current liabilities.
Cash ratio
Cash ratio is another important aspect of evaluating a firm position concerning meeting its short-term
obligations. In this aspect, the cash ratio evaluates the capability of a firm to offset the short-term
obligations with its cash and cash equivalents. This is a stricter parameter because it emphasizes
the firm's meeting short term demands with its most liquid assets- cash and cash equivalents
Aramco has reported fluctuations in its cash ratio structure over the 3 years. In 2021, it had a
better position as compared to the other two years. A higher value implies the company is better
off. 2019 and 2020 recorded the least cash ratio of 82 & 85 %. However, in 2021, the company
adopted a more focused approach and increased its efficiency.

Quick ratio
Quick ratio assesses the extent to which cash and other currents assets can be readily converted
into cash and meet a company’s short-term obligations.

In year in 2020, ARAMCO reported the lowest ratio, which implies that it could only 1.42 of its
short-term obligations using cash and current assets. in 2021, the company was at the highest
position to convert its cash and current assets into cash and pay off its cash demands. This shows
a positive trend of ARAMCO, meaning that it can manage its liquidity at any given point in the
four years, as well as using the other cash in meeting other company’s obligations efficiently.

Price to Earnings Ratio

42
Earnings per share ratio (EPS) is a financial ratio calculated by dividing net income by the total
number of issued common shares. Investors use EPS to assess a company's performance
and profitability before investing. The higher the EPS, the better the financial condition, the higher the
value, and the more profits to distribute to shareholders.
The earnings per share ratio (EPS) is the percentage of a company's net income per share if all profits
are distributed to shareholders. The earnings per share ratio tell a lot about the current and future
profitability of a company.
Price to Earnings Ratio or Price to Earnings Multiple is the ratio of share price of a stock to its
earnings per share (EPS). PE ratio is one of the most popular valuation metric of stocks. It
provides indication whether a stock at its current market price is expensive or cheap
The P/E ratio is calculated by dividing the market value price per share by the company’s
earnings per share.
2019 2020 2021
Share price
P/E
EPS
A “good” P/E ratio isn't necessarily a high ratio or a low ratio on its own. The market average P/E ratio
currently ranges from 20-25, so a higher PE above that could be considered bad, while a lower PE ratio
could be considered better.

To conclude the overall analysis of the ARAMCO. First, the company values were discussed,
then the financial analysis was done with the help of financial ratios. ARAMCO has performed
almost every year by maintaining high ratios and high-profit margins. The company has
competitors operating in the same market as Saudi Arabia. Besides these, the investments and
earning of the company is also used for military, and social purposes as well as princes living
is also expenses by the company. Therefore, the company has a bright future in the country by
having more than average revenues

43
Analysis & Findings:

Fundamental Analysis

It is carried out through the analysis of the following 3 phases

ECONOMY ANALYSIS

The Oil Industry started off more than five thousand years back. Oil sipping up from the ground
was used to make the boats waterproof in the Middle East and also used as medicating as well as
for painting different things. The demand for Oil was much higher than what it actually produced
and this brought forward the concept of making oil production companies which is collectively
known as the Oil Industry. The Oil Industry is a very important industry in the world and a lot
depends on the price of the oil and it has been observed that whenever the oil prices increase the
price of various products also in increase.

The Oil Industry also through oil production accounts for a large amount of the consumption of
energy. According to the statistics the amount of oil consumed by the world every year is as
many as 30 billion barrel The Oil Industry can be parted in two, Upstream and Downstream. The
importance of oil in the world evolved at a slow pace but once it was identified, it became one of
the most important things in the lives of human beings. The Impact of Oil Price Crash on
Different Industries and Overall Indian Economy is very prominent. The price trend is crucial for
the government in bringing out vital economic and policy reforms in India.

INDUSTRY ANALYSIS

Saudi Arabia holds 266,578,000,000 barrels of proven oil reserves as of 2016, ranking 2nd in the
world and accounting for about 16.2% of the world’s total oil reserves of 1,650,585,140,000
barrels.

Saudi Arabia has proven reserves equivalent to 221.2 times its annual consumption. This means
that, without Net Exports, there would be about 221 years of oil left (at current consumption
levels and excluding unproven reserves.

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Saudi Arabia possesses approximately 17 percent of the world’s proven petroleum reserves and
ranks as one the largest net exporters of petroleum. Saudi Arabia has the second-largest proven
oil reserves in the world. Saudi Aramco, one of the world’s largest integrated energy and
chemicals companies, operates along two major segments: Upstream and Downstream. In 2020,
Aramco’s average hydrocarbon production was 12.4 mmbpd, including 9.2 mmbpd of crude oil.
In comparison, Aramco’s average hydrocarbon production in the first half of 2021 was 11.6
mmbpd, of which 8.6mmbpd is attributed to crude oil production. As OPEC+ has slowly raised
quotas, Saudi Arabia’s output has followed suit; as of June 2022, Saudi Arabia was producing
10.3mmbpd of crude oil. Following the economic downturn and volatile oil prices seen in
2020, oil prices rebounded in 2021 and have continued to increase in 2022.

Соnсlusiоn

On the study of the SWOT Analysis of Saudi Aramco, we know that it is the World’s Largest Oil
and Gas Company. It has Large Production and Refining capacity in the market and it also uses
advanced technologies in its production process. Even with such advantages it still has some
flaws which need to be fixed.

It has high dependability on only one product and the exploration of new products in other
countries can create a disadvantage for Saudi Aramco. However, it can increase its brand
awareness in the market with the help of advanced digital marketing techniques which will help
the company to increase its brand value of the product. Digital marketing is very essential for
every business nowadays as most people are using social media and it is easy to find their target
audience.

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COMPANY ANALYSIS

An analysis is going to be performed of Saudi Aramco from Oil & Gas sector. Ratio Analysis of
the company is done and interpretations have been drawn from it as follows

The Saudi Arabian Oil Company (also called Saudi Aramco) is one of the largest companies in
terms of profits and revenue. This state-owned organization or enterprise operates in the oil and
gas industry and has the biggest hydrocarbon network in the world by the name the Master Gas
System. Saudi Aramco has its headquarters in Dhahran and it has over 65,000 workers. The
company’s topmost managers focus on evidence-based leadership strategies that can make it
successful and support the Saudi Vision 2030.

 Major achievements of Saudi Aramco

 Saudi Aramco wins five awards at 2018 Oil and Gas Awards Middle East

 For Technical Innovation of the Year, Saudi Aramco’s EXPEC ARC shared the award
for its Waterflood Monitoring with Surface-to-Borehole Electromagnetics with the
company’s strategic partner, Schlumberger.

 Taking the HSE (Health, Safety, and Environment) Initiative of the Year award, Saudi
Aramco’s EXPEC Advance Research Center (ARC) impressed judges with both the
environmental benefits and the cost efficiency of its carbon capture, utilization and
sequestration through the Carbon Dioxide Enhanced Oil Recovery (CO2 EOR) Pilot
Project.

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FINANCIAL RATIOS

Financial Ratios and Their Importance:

Assessment of financial performance and soundness is critical to any company. this gives the general
direction of a firm in assessing its strength and weakness in comparison to other peers in the industry.
Information obtained from financial ratios analysis is important not only to a firm's manager but also
relevant to stakeholders in making informed decisions. This study is an assessment of ARAMCO
company, by adopting financial ratios analysis. The data is obtained from the company’s financial
statements during 3 years.

Methodology and data

In table 1, all data of ARAMCO was gathered through yahoo finance. The data was used to determine
the ratios by computing the formulas. The ratios were measured only for the past three years in which
the financial activity of the company is analyzed.

The financial ratio is the tool used by the finance and accounts managers to assess the
performance of the company through different performance indicators. These ratios are
beneficial for both internal and external users. To be more specific the financial ratio is the tool
that sees and identifies the relationship between 2 or more than two variables. In general, we
use them to compare different factors. It is also used based on different time gaps or different
companies or sometimes it is also used to identify the performance of the company with the
entire industry.

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INTRODUCTION TO TECHNICAL ANALYSIS

Technical analysis is a method of evaluating securities by analyzing the statistics generated by

market activity, such as past prices and volume. Technical analysts do not attempt to measure a
security’s intrinsic value, but instead use charts and other tools to identify patterns that can
suggest future activity.

Despite all the exotic tools it includes, technical analysis really just studies supply and demand in
a market in an attempt to determine what direction, or trend, will continue in the future. It
attempts to understand the emotions in the market by studying the market itself, as opposed to its
components.

Technical analysis looks at the price movement of a security and uses this data to predict its
future price movements.
Technical analysis can be used on any security with historical trading data. This includes Forex,
stocks, futures and commodities, fixed-income securities, etc. In this part of the tutorial, well
emphasize analyzing Forex in our examples, but keep in mind that these concepts can be applied

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to any type of instrument. In fact, technical analysis is more frequently associated with
commodities and Forex.

Unlike fundamental analysis, which tries to determine the underlying value of a trading
instrument, technical analysis looks for when the market actually begins to spot mispricing. Once
the mispricing is identified, the market will tend to correct the situation. This event however
requires some time to occur and takes place gradually, forming a trend on the chart. A technical
traders aim will be to enter the market as the adjustment process is under way and leave once it
has come to an end.

A common misconception is that technicians try to predict the future. While some actually
attempt to do that, they don’t achieve any more success than economists in general. However,
those technicians who use their skills and efforts to identify trends are the ones who turn out
successful. Spotting trends is a much easier and much more profitable approach to the markets,
instead of trying to see in the future.

Technical Analysis

Technical analysis of the following company is done on the following parameters as given
below:

1. Relative Strength Index (RSI)

2. Moving Average Convergence Divergence (MACD)

RSI

What Is the Relative Strength Index (RSI)?

The relative strength index (RSI) is a momentum indicator used in technical analysis. RSI
measures the speed and magnitude of a security's recent price changes to
evaluate overvalued or undervalued conditions in the price of that security.

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The primary trend of the stock or asset is used to ensure that the indicator's readings are
properly understood. Well-known market technician Constance Brown widely promoted the
idea that an oversold reading on the RSI that occurs in an uptrend is likely much higher than
30% while an overbought reading on the RSI that occurs during a downtrend is much lower
than 70%.2

Traditional interpretations and usage of the RSI dictate that values of 70 or above suggest that a
security becomes overbought or overvalued and may be primed for a trend reversal or corrective
price pullback. An RSI reading of 30 or below indicates an oversold or undervalued condition.

RSI FOR SAUDI ARAMCO

RSI indicator is a momentum indicator, which measures over bought and over sold conditions in
the market. The indicator oscillates between 0 and 100, with the values below 30 traditionally
showing oversold conditions in the market, which in this case doesn’t go below 30.

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Conclusion

Saudi Aramco operates in Saudi Arabia with the largest portfolio of any crude oil company. The
company has more than 10 million barrels/day of incredibly low cost crude production. It’s high
per-barrel margins are impacted by high taxes from Saudi Arabia, meaning that the company’s
current FCF is in the 4-5% range.

The company is affected by the whims of the Saudi Arabian state. It’s also influenced by the
policies of OPEC and mandatory supply cuts. In a market where oil might be much less popular
decades from now, it has a 25-year FCF payback, highlighting how expensive the company is. In
our view, the company is a poor investment in the energy markets

Recommendation
 The following recommendations can be draw for the further development of the Saudi
Aramco -
 Saudi Aramco should always provide emphasis on customer demand. It should always
satisfy the dealers demand and arrange product availability.
 It should always pay heed to the dealers’ growth rate, take initiatives to recover gap and
always monitor their activities.

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  Saudi Aramco should restructure its sales system. It can restructure through employing
more SOs, day to day sales and delivery system, enrich end-user activists activities,
frequent market visit, better communication with distribution.
 Its general sales procedures like taking order, preparing invoice, categorization of
invoice, preparing rout plan, lining products for loading, final check and loading of
vehicles should be fast customer oriented.
 It should also organize distribution system through increase space for store systematic
way, frequently update its database systems which shows products, pack size and
increase the number of delivery van.
 Always get in touch with what the customers want, and allow everyone to give probable
suggestions for the betterment of the company.

REFERENCES / BIBLIOGRAPHY

http://economictimes.indiatimes.com/configspace/ads/defaultinterstitial.html2.

http://www.worldoil.com/magazine/2015/july-20153.

www.wikipedia.com4.

www.investopedia.com/university5.

www.diffen.com

www.moneycontrol.com ›

http://www.ft.com/companies/oil-gas9.

www.stockcharts.com

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https://www.ukessays.com/essays/economics/pestel-analysis-on-petroleum-industry-economics-
essay.php

https://energyroutes.eu/2016/05/08/pest-analysis-for-global-oil-and-gas-companies-operations/

www.mindtools.com

https://business-essay.com/saudi-aramco-oil-company-analysis/

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