Saudi Arabia's sovereign wealth fund has acquired shares valued at a combined $1 billion in four European oil giants: Shell, Eni, Total, and Equinor, the Wall Street Journal disclosed, citing unidentified sources with knowledge of the acquisition.
The Public Investment Fund took advantage of the collapse in price of oil which pushed down the stocks of oil producers, making them a bargain for investors with the wherewithal to acquire. The fund can continue to create stakes in major players in the market as well.
According to sources, the Saudis have been on a shopping spree of sorts almost on a daily basis in the last few weeks, particularly because many of these companies' share prices were in the area of correction and dividend yields were very high.
They have been buying on the grounds that everything else is very affordable and they are upbeat on the long-term projection for oil prices, the sources stated, adding the sovereign fund had invested into other companies that don't need transparency too.
The novel coronavirus pandemic has disrupted global commerce, forced factories to cut back or shut down, and resulted in widespread lockdowns aimed at halting its spread, slashing fuel demand.
Despite refusing to compromise on production cuts, Saudi and Russia are now locked in an oil-price battle, suggesting there is a supply glut.
Since January, shares in Anglo-Dutch behemoth Shell, Norwegian oil giant Equinor, French producer Total, and Italian rival Eni have all plunged over 30 per cent. Equinor's stock was flat on Thursday in early trading, while the other three increased by around 1 percent.
The Kingdom's $320 billion sovereign wealth fund, controlled by Yasir Al-Rumayyan and managed by Crown Prince Mohammed bin Salman, is capitalizing on a downturn in stock market valuations as it ramps up the deal to become the world's largest sovereign capital manager.
The fund created an 8.3 percent interest in cruise operator Carnival Corp. last month after shares plummeted due to the ongoing global health crisis. It has also invested $45 billion to SoftBank's $100-billion Vision Fund.
The Public Investment Fund - a crucial part of the crown prince's program to diversify the Kingdom's economy away from its reliance on oil - has made a series of high-profile investments in the past years, amassing holdings in Tesla Inc and Uber Technologies.
PIF, Equinor and Shell officials declined to comment. Complete and Eni were not available to comment outside regular business hours.
Nevertheless, it is uncommon to create stakes in some of the largest international oil companies, particularly because Al-Rumayyan also heads up the state-owned crude producer Saudi Aramco. He is also a loyal advisor to the crown prince, who sets the oil production strategy for the kingdom and affects prices globally.
