April 10, 2020 [MarketWatch – Published on April 8, 2020] – Saudi Arabia’s sovereign-wealth fund has amassed stakes worth roughly $1 billion in four major European oil companies, according to people familiar with the matter, buying assets it perceives as undervalued in a market depressed by the coronavirus pandemic and low oil prices.
The stakes in Equinor ASA, Royal Dutch Shell PLC, Total SA and Eni SpA were all bought by the Public Investment Fund on the open market in recent weeks, said the people, who added that the fund may continue to make stock purchases.
“The PIF is getting active again in the market..I would not be surprised if we see similar deals again,” said a Saudi official.
The investments mark a significant tactical shift for the roughly $300 billion Public Investment Fund, tasked by Crown Prince Mohammed bin Salman with diversifying the country’s economy away from oil by largely investing in companies and industries untethered to hydrocarbons.
The purchases also come at a precarious financial moment. Saudi Arabia’s budget deficit is expected to widen this year as oil revenue falls and the kingdom increases spending to fund a stimulus package to combat economic damage caused by a countrywide coronavirus lockdown.
PIF bought a stake worth around $200 million in majority-state-owned Norwegian oil giant Equinor in the days around a sharp rally in oil prices last week. A Saudi-based nominee account with JPMorgan Chase & Co. accrued around 14.5 million shares — or 0.43% of the total shares — between March 30 and April 6, according to data from Oslo Market Solutions. The move made that account Equinor’s 12th largest shareholder.
It couldn’t be determined what size stakes PIF had bought in Royal Dutch Shell, Total and Eni, but people familiar with the investments said the combined stakes were worth about $1 billion.
Spokespeople from Equinor, Royal Dutch Shell, Eni and J.P. Morgan declined to comment while the Saudi Public Investment Fund and Total didn’t respond to a request for comment.
The purchases came during a tumultuous few weeks in the oil markets. Petroleum prices have fallen nearly 30% since early March, when Saudi Arabia mounted a price war with Russia, but staged historic rallies last week.
U.S. crude oil notched its largest ever daily percentage gain last Thursday after President Trump and the Saudi regime expressed optimism about the possibility of a deal between the Organization of the Petroleum Exporting Countries and other oil-exporting nations to address a global oil glut.
The $300 billion Saudi sovereign-wealth fund is controlled by Prince Mohammed and run by Yasir al-Rumayyan — who is also chairman of majority-state-owned Saudi Aramco. On Monday the fund disclosed an 8.2% stake in Carnival Corp., the world’s largest cruise operator, whose shares have dropped more than 75% this year.
That investment came after high-profile deals in recent years, including a $3.5 billion stake in Uber Technologies Inc. and a $45 billion commitment to SoftBank Group Corp.’s Vision Fund.
Stocks in the travel and energy sectors have been among those hammered by government-imposed lockdowns and travel bans motivated by the coronavirus pandemic. Equinor shares pared some of their heavy losses so far this year last week, but remain down 23% for 2020. Shares closed 0.3% lower at 135.80 Norwegian kroner Wednesday.
Shell, Total and Eni have respectively shed 35%, 31% and 33% of their value in 2020, while Brent crude, the global benchmark, is down 52%.
OPEC and other oil-producing countries including Russia are due to convene a teleconference Thursday, before the Group of 20 nations host an energy ministers meeting Friday to debate the conclusions of the OPEC+ meeting.
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