Best-Paid U.S. Hedge Fund Managers Take Home $13 Billion
Hedge funds lost money for their investors last year but the industry's top-paid managers had a banner year, with five men earning more than $1 billion each in 2015.
Together, the 25 best-paid hedge fund managers took home $13 billion, 10 percent more than the previous year. For many, computer models played a critical role in their success, according to Institutional Investor's Alpha's 15th annual ranking of the industry's highest-earning managers.
Citadel's Kenneth Griffin, who started trading from his Harvard dormitory in the 1980s, and Renaissance Technologies' James Simons, a former code breaker who launched his fund in 1982, each took home $1.7 billion in 2015 to tie for top honors. In 2014, they also took home 10 figures each but slightly less than in 2015, to claim the No. 1 and No. 2 spots.
Bridgewater's Raymond Dalio, Appaloosa Management's David Tepper and Millennium Management's Israel (Izzy) Englander rounded out the top five spots, with each man making more than an $1 billion in 2015, the survey shows.
Oil Bust Gives Billionaire Deal-Maker Buyer’s Remorse
Energy Transfer Equity’s Kelcy Warren wants to restructure or escape the biggest deal of his life, but seller Williams Cos. won’t let go
Kelcy Warren became a billionaire oil man by making deal after deal, including purchases of thousands of miles of pipelines after Enron Corp. collapsed. Now he is suffering from a severe case of buyer’s remorse.
As low oil prices spread pain throughout the energy industry, Energy Transfer Equity LP, the Dallas company where Mr. Warren is chairman, is scrambling to restructure or escape a $33 billion agreement announced just seven months ago to acquire Williams Cos., based in Tulsa, Okla. The deal would create a 100,000-mile network of pipelines.
Mr. Warren, 60 years old, has overseen a series of moves that could torpedo the biggest acquisition of his life, such as an unusual convertible preferred share issue that would dilute Williams shareholders and increase his own stake in the combined company.
When Williams Chairman Frank MacInnis called in February to complain, Mr. Warren responded curtly, according to Mr. MacInnis. “No one was going to tell him how to run his company,” Mr. MacInnis said in the unredacted version of a court filing reviewed by The Wall Street Journal. The comment is crossed out of a publicly available copy of the filing.
Energy Transfer disputes the comment but says the two men have talked a number of times about what would be in the best interest of shareholders. The company says Mr. Warren isn’t trying to kill the deal but is emphatic that it needs to be restructured.
The deal, one of the largest announced in 2015, is now in danger of becoming one of the highest-profile corporate casualties of the oil bust. After Messrs. Warren and MacInnis announced the agreement on Sept. 28, oil prices fell about 40%, though they have since rebounded. The share prices of both companies are still down by roughly half. The tumult also cost Energy Transfer’s chief financial officer his job.
The mess shows how vulnerable many deals are to souring financial markets. Deals touted as mutually beneficial when announced can quickly turn better for one side than the other. The same thing happened when credit dried up in the financial crisis and droves of buyers scrambled to get out of deals.
So far this year, about $378 billion in U.S. mergers and acquisitions have been abandoned, more than 40% higher than in all of 2015, according to Dealogic. This year’s broken-deal total will be a record even if no more deals fall apart.
Recent examples include Pfizer Inc.’s proposed $150 billion takeover of fellow drugmaker Allergan PLC and the $35 billion merger of oil-field services companies Halliburton Inc. and Baker Hughes Inc., which crumbled under pressure from U.S. regulators. Honeywell International Inc. and Canadian Pacific Railway Ltd. walked away from reluctant takeover targets.
Williams has filed lawsuits against Energy Transfer and Mr. Warren over the share issuance, alleging that it cheats Williams shareholders.
After initially resisting the deal, Williams now is considering asking a judge to force Energy Transfer to complete the takeover, say people familiar with the matter. Williams says a failed deal would cost its shareholders $10 billion in lost value.
Mr. Warren has long kept a tight grip on his sprawling pipeline empire, launched two decades ago. In addition to Energy Transfer, he essentially controls three other publicly traded companies stitched together so complicatedly that some analysts decline to follow them, they say.
He also is one of the country’s richest men, with a net worth estimated at $7 billion by Forbes. Mr. Warren owns a private island in Honduras and an 8,000-acre property near Cherokee, Texas, that was once an exotic-animal ranch and is still home to roving zebras and buffalo.
His 23,000-square-foot Dallas mansion, bought for $30 million in 2009, includes a bowling alley and a baseball diamond that features a scoreboard with “Warren” as one of the teams.
He is an avid music fan and owns an independent recording studio that produced in 2014 a Jackson Browne tribute album with cover songs by musicians such as Bonnie Raitt and Don Henley.
Mr. Warren has boasted of seeing opportunity in downturns. He launched Energy Transfer in the wake of Enron’s demise and then expanded.
In 2012, another company he runs, Energy Transfer Partners, agreed to buy Sunoco Inc. for $5.3 billion while Sunoco was in the middle of a complex restructuring. The $5.7 billion takeover of pipeline company Southern Union Co., also in 2012, came after a hostile bidding war.
In 2013, he hired Jamie Welch, a longtime energy investment banker at Credit Suisse Group AG who shared Mr. Warren’s hearty appetite for deals.
The two men saw an opening in the oil rout that started in 2014, which Mr. Welch described as “a once-in-a-lifetime opportunity.”
During a brief uptick in oil prices early last year, Mr. Warren told analysts: “This is going to sound odd to you, almost sadistic, but I was disappointed to see a rebound in crude prices…I was excited to see who might be more vulnerable if we saw this market continue a downward trend.”
Energy Transfer set its sights on Williams and its crown jewel: the 10,000-mile Transco gas pipeline. But Williams stiff-armed Energy Transfer for months, according to securities filings.
When Energy Transfer made an all-stock offer in June then valued at $48 billion, Williams rejected it as too cheap and plowed ahead with plans to absorb an affiliate.
By the fall, Williams’s outlook had worsened. In addition to sapping pipeline demand, oil’s slide had hurt Williams’s gas-processing business, which is especially vulnerable to price swings. A big customer, Chesapeake Energy Corp., looked increasingly troubled, too.
At a meeting of Williams’s board of directors in Tulsa in September, the company’s advisers said investors were losing patience, according to people familiar with the matter.
Hopes briefly flickered for a white-knight transaction with Warren Buffett-backed MidAmerican Energy Co., which expressed last-minute interest, but talks went nowhere, some of the people say.
Energy Transfer kept pushing for a deal, but the Williams board was divided seven to six against it. With tensions running high, the group took a break for dinner. Unable to find a private dining room big enough to accommodate them, they split into two groups, one “for” and the other “against,” people familiar with the matter say.
When the meeting reconvened in the morning, two directors had changed their minds. The deal was approved by an 8-5 vote.
Energy Transfer shareholders, who had bid up the stock price when the offer first surfaced, were unimpressed with the details of the takeover announcement. Energy Transfer shares fell 13% in one day.
Early signs that regret was setting in came when Mr. Welch, Energy Transfer’s finance chief, painted the deal unfavorably in conversations with some Williams shareholders in January.
He even suggested that they consider voting against it if they weren’t able to persuade Williams’s board of directors to revise the deal’s terms, these people say.
The merger contract is written with unusually tight provisions on how Energy Transfer can get out of the deal. Williams shareholders can vote it down.
Word of Mr. Welch’s efforts, which were earlier reported by the New York Times, filtered back to Williams. Integration meetings were postponed and progress slowed, people familiar with the matter say.
Energy Transfer’s public statements about the deal got noticeably cooler. In March, the company slashed its estimate of annual cost savings at the combined companies by more than 90%, said it would suspend cash distributions for at least two years and warned that a credit-rating downgrade was possible because of the combined companies’ heavy debt load.
Energy Transfer also backed away from its promise to keep a major presence in Williams’s hometown of Tulsa after the deal is completed.
Last month, Energy Transfer said its lawyers couldn’t guarantee the transaction would be tax-free to Williams investors, a condition of the merger’s completion. Williams disputes Energy Transfer’s legal position and says it is an attempt by Energy Transfer to wriggle out of the deal.
On an earnings call last week, Mr. Warren was dour about the takeover. “Absent a substantial restructuring of this transaction, which Energy Transfer has been very willing and actually desiring to do—absent that, we don’t have a deal,” he said. Mr. Warren declined to comment for this article.
One big sticking point is the $6 billion cash portion of the deal, or $8 a share. Energy Transfer and some analysts are worried that the cash payout would saddle the combined company with too much debt.
“Kelcy is firing every bullet he has,” says Benjamin Michaud, an analyst at asset manager H.M. Payson & Co., which owns $10 million of Williams shares and supports the takeover. “But from the standpoint of a Williams shareholder, $8 [a share] is very significant.”
Some Williams shareholders say there is so much acrimony between the two companies that it is hard to imagine them getting along if the deal goes through. “There’s got to be a lot of bad feelings on both sides of the aisle,” says Jay Rhame, a portfolio manager at Reaves Asset Management.
Tulsa Mayor Dewey Bartlett Jr. says that he sees nothing good about the proposed takeover and that he recently told Mr. MacInnis that in a meeting in New York. Mr. MacInnis declined to comment for this article.
The biggest flashpoint is the convertible-share issuance. In March, Energy Transfer insiders, including Mr. Warren, President John McReynolds and two directors, swapped their existing shares for special units, which would forgo cash distributions over the next nine quarters.
Those units are convertible into regular shares at a discount to the market price, giving their holders a bigger stake than they started with.
Energy Transfer has said the move would save $518 million to help pay down debt. The company says it wanted to offer the shares to all its investors, but Williams withheld its consent. Williams says it opposed the move because it would hurt Williams shareholders.
In April, Energy Transfer said it intended to suspend cash distributions after the merger, meaning the insiders will have given up nothing but still stand to receive more equity when the units are converted in 2018.
People familiar with the matter say Mr. Welch disagreed about how far Energy Transfer could go to try to get out of the takeover and balked at the convertible-share issuance. The finance chief told Mr. Warren the share issuance would damage Energy Transfer’s reputation on Wall Street. He also told his boss that he wouldn’t publicly defend the move, these people say.
That was the last straw in a relationship that already had become troubled. The cash portion of the deal terms was Mr. Welch’s idea, according to people familiar with the matter. He had argued that by including more cash, Energy Transfer could issue less stock and keep more of the upside of the combined company.
But as the industry’s outlook worsened and investors grew concerned about the combined company’s debt load, what seemed like a win for Energy Transfer became a liability.
Mr. Warren ordered Mr. Welch’s firing, according to people familiar with the matter. The company announced Feb. 5 that he had been replaced.
Mr. Welch has sued Energy Transfer for compensation he says he is owed by the company. Mr. Welch has said his termination was “motivated by an agenda unrelated” to his performance as chief financial officer.
Mr. Warren told analysts that “the decision was made by me that we needed to make a move, and we did.”
Last month, Williams filed one lawsuit in Delaware seeking to undo the convertible preferred share issue and another in Texas alleging that Mr. Warren interfered with the deal. Energy Transfer responded with a countersuit and says Williams breached the merger agreement by refusing to give its consent for the shares to be offered to all investors.
Unless the companies reach a surprise settlement, the deal’s fate will likely be decided by a judge in Delaware. A court hearing is scheduled for mid-June.
Walt Disney misses by $0.04, misses on revs
- Reports Q2 (Mar) earnings of $1.36 per share, $0.04 worse than the Capital IQ Consensus of $1.40; revenues rose 4.1% year/year to $12.97 bln vs the $13.2 bln Capital IQ Consensus.
- First earnings miss since 2Q11; third sales miss in last four quarters.
- Cable Networks revenues for the quarter decreased 2% to $4.0 billion and operating income increased 12% to $2.0 billion due to an increase at ESPN, partially offset by lower equity income from A&E. The increase at ESPN was due to the benefit of lower programming costs and higher affiliate revenues, partially offset by a decrease in advertising revenue. Results for the quarter benefited from the timing of our fiscal quarter end relative to when College Football Playoff (CFP) bowl games were played, which resulted in a decrease in programming costs and advertising revenue. Affiliate revenue growth was due to contractual rate increases, partially offset by a decline in subscribers. Lower advertising revenue was due to lower ratings and rates, which were negatively impacted by the timing of CFP bowl games, partially offset by higher units sold.
- Broadcasting revenues for the quarter increased 3% to $1.8 billion and operating income decreased 8% to $278 million due to lower operating income from program sales and higher programming and marketing costs, partially offset by advertising and affiliate revenue growth.
- Parks and Resorts revenues for the quarter increased 4% to $3.9 billion and segment operating income increased 10% to $624 million. Operating income growth for the quarter was due to an increase at our domestic operations, partially offset by a decrease at our international operations.
- Studio Entertainment revenues for the quarter increased 22% to $2.1 billion and segment operating income increased 27% to $542 million. Higher operating income was due to an increase in theatrical distribution results and growth in TV/SVOD distribution, partially offset by the impact of foreign currency translation due to the strengthening of the U.S. dollar against major currencies, decreased home entertainment results and higher film cost impairments.
· Consumer Products & Interactive Media revenues for the quarter decreased 2% to $1.2 billion and segment operating income decreased 8% to $357 million.
Closing Market Summary: Averages End Near Highs as Oil Rallies and Cyclicals LeadThe stock market ended the Tuesday affair broadly higher as the S&P 500 (+1.3%; month-to-date +0.9%) erased its monthly loss. Focal points of today's trade included positive data from overseas, a rebound in oil prices, a largely range-bound session in the U.S. dollar, and the outperformance of the heavily-weighted industrial (+1.7%) and financial (+1.4%) sectors. The Dow Jones Industrial Average (+1.3%) ended ahead of the benchmark index (+1.3%) and the tech-heavy Nasdaq (+1.3%).
The stock market began its day with a broad-based rally after most global equity markets traded higher in overnight action. In Germany, the DAX gained 0.7% after Germany's Trade Balance Report for March revealed that export growth (+1.9%; consensus -0.1%) for the month beat analysts' estimates. In Asia, the yen received another reprieve from finance minister Taro Aso. The minister issued another warning of intervention in the currency market should the recent strength in the yen threaten Japan's economy.
The major averages extended their opening gains in lockstep with oil. The energy component climbed throughout the session as it rebounded from yesterday's 2.6% decline. WTI crude ended its day higher by 2.9% at $44.70/bbl. Oil still remains lower by 4.4% since last month's settlement at $46.76/bbl. Supply disruptions in Canada and Nigeria have been widely credited for the increased buying interest.
Equities extended their rally through the afternoon as the six cyclical sectors outperformed. On that note, commodity-sensitive energy (+1.8%) and materials (+1.7%) led industrials (+1.7%), financials (+1.4%), consumer discretionary (+1.3%), and technology (+1.3%) followed.
In the industrial space (+1.7%), farm equipment names and aerospace companies outperformed. Caterpillar (CAT 72.51, +1.73) and Deere (DE 83.81, +3.23) gained a respective 2.4% and 4.0% after the World Agricultural Supply and Demand Estimates Report elicited a bullish response in agriculture names. Meanwhile, rail companies outperformed in the Dow Jones Transportation Average (+1.2%) as CSX (CSX 26.37, +0.52) and Norfolk Southern (NSC 90.31, +2.03) gained 2.0% and 2.3%, respectively.
The financial sector (+1.4%) traded higher in sympathy with European banking names after Credit Suisse (CS 13.90, +0.56) reported better than feared quarterly results. Elsewhere, investment brokerages outperformed as Goldman Sachs (GS 161.42, +3.91) and Charles Schwab (SCHW 28.01 +0.74) jumped 2.5% and 2.7%, respectively. Elsewhere, Leucadia National (LUK 17.71, +0.99) gained 5.9% after it agreed to buy ITG Investment Research from Investment Technology (ITG 18.89, +0.30) for $12 million in cash. Investment Technology does not expect to book a material loss or gain from the deal.
In the consumer discretionary space (+1.3%), Amazon (AMZN 703.24, +23.494) hit a new 52-week intraday high (704.55) after ChannelAdvisor disclosed positive April same stores sales for the company. Separately, Amazon received a price target increase to $1000 from $770 at Deutsche Bank. Elsewhere, Walt Disney (DIS 106.60, +1.26) gained 1.2% ahead of this evening's quarterly report.
The heavyweight technology sector (+1.3%) ended ahead of the broader market as large caps Alphabet (GOOG 723.18, +10.28) and Microsoft (MSFT 51.02, +0.95) outperformed. Meanwhile, Apple (AAPL 93.39, +0.60) ended behind the broader sector as a report from Nikkei weighed. The article received a bearish response as it cited increased competition in the Chinese smartphone market.
The U.S. Dollar Index (94.24, +0.10) finished flat with the greenback gaining against the euro and the yen, but falling against the commodity-sensitive Canadian dollar. The euro/dollar pair finished lower by 0.1% at 1.1370 while the dollar gained 0.9% against the yen (109.28). The dollar/Canadian dollar pair ended lower by 0.4% (1.2914) as it benefited from an uptick in oil.
The Treasury complex ended flat with the yield on the 10-yr note unchanged at 1.75%.
Today's participation was below the recent average as fewer than 831 million shares changed hands on the NYSE floor.
Today's economic data included the March Job Openings and Labor Turnover Survey and Wholesale Inventories for March:
- Wholesale inventories increased 0.1% in March (consensus +0.2%) after declining a downwardly revised 0.6% (from -0.5%) in February.
- This was the first time in six months that there was an increase in wholesale inventories.
- The modest uptick was fueled by a 0.5% increase in nondurable inventories, which was powered by a 2.0% increase in drug inventories and a 3.3% jump in petroleum inventories.
- Durable inventories were down 0.1%. That decline was led by a 2.0% drop in metals inventories and a 1.6% drop in electrical inventories. A 1.0% jump in automotive inventories acted as a major offset.
- Wholesale sales increased 0.7% following an unrevised 0.2% decline in February.
- The wholesale inventories to sales ratio held steady at 1.36, but was up from 1.32 in the same period a year ago.
- On a year-over-year basis, wholesale sales are down 2.0% while wholesale inventories are up 0.3%.
- The March Job Openings and Labor Turnover Survey showed that job openings decreased to 5.757 million from a revised 5.608 million (revised from 5.445 million) in February.
Tomorrow's economic data will be limited to the 14:00 ET release of the April Treasury Budget.
- Nasdaq Composite -3.9% YTD
- Russell 2000 -0.6% YTD
- S&P 500 +2.0% YTD
- Dow Jones +2.9% YTD
Trouble in the energy sector was one of the themes of the first quarter for the big US banks, where provisions for loan losses leapt an average 61 per cent from the same period a year earlier, according to DBRS, the credit rating agency.
Now, with many banks deep into the twice-annual process of resetting borrowing limits for their energy customers, they say they are cutting facilities by between 20 and 25 per cent — a deeper contraction than the 15 to 20 per cent cuts in the second half of last year.
The squeeze comes despite a recovery in the price of oil, which has risen more than 60 per cent from its February lows. It is likely to mean that more cash-strapped borrowers tip into bankruptcy.
“At the margin, the higher spot price has helped, but it has definitely not fixed companies with too much leverage in their capital structure,” said one senior Texas-based banker, speaking on condition of anonymity. Another banker at a rival bank noted that, unlike late last year, most customers no longer had the option of refinancing via equity markets or high-yield bond markets.
“It’s a little trickier this spring,” he said. “The market is running out of places to go for money.”
April was the heaviest month for energy company bankruptcies since the oil price started to turn in late 2014, according to Haynes and Boone, a Dallas-based law firm. Eleven companies filed for Chapter 11 protection during the month with total debts of $14.9bn — a significant increase from March, which saw seven collapses with total debts of $1.9bn.
On Monday Chaparral Energy, an Oklahoma-based oil producer, became the latest US independent to file for bankruptcy, filing for Chapter 11 protection with debts that were about $1.6bn at the end of last year.
It followed Chapter 11 filings last month from other midsized US independents, including Ultra Petroleum, a Houston-based gas producer that has debts of $3.9bn, and Midstates Petroleum, an Oklahoma-based oil producer that owes $2bn.
The largest North American oil producer to go bust in this downturn has been Pacific Exploration & Production, which is Toronto-based but operates in Colombia and elsewhere in South America. It filed for bankruptcy at the end of April, owing $5.3bn
Companies that have entered Chapter 11 are typically unable to raise enough money from asset sales to cover their debts because of the depressed market for oil and gas reserves.
Osage Exploration and Development, a California-based oil and gas producer, filed for bankruptcy in February owing about $43m. In April the court approved the sale of its assets for just $8.4m.
Analysts said energy exposures were likely to weigh on the big banks’ earnings throughout the year, in some cases offsetting improvements in credit quality in other corners of their loan portfolios. At Bank of America, which is still boosting profits by releasing reserves for losses in parts of its consumer banking business, net releases during the period came to just $71m, down from $429m a year earlier, as the bank built up reserves in its energy book.
“It is difficult to call ‘peak provision’ on an individual bank basis, as charge-offs accelerate into the back half of the year,” said Ken Usdin, analyst at Jefferies in New York. He noted that regulators including the Office of the Comptroller of the Currency have been urging lenders to take a more comprehensive look at borrowers’ indebtedness — including junior liens and unsecured debt — when assessing their own positions.
Fitch, the rating agency, calculated recently that 67 per cent of its sample of US exploration and production companies had balance sheet leverage ratios in line with levels that the OCC considers higher risk.
In the latest round of redeterminations of borrowing limits, the outcomes have varied widely.
Chesapeake Energy’s banks last month agreed to keep its borrowing limit at $4bn, although they required additional assets as collateral. However, Denbury Resources had its limit cut 30 per cent to $1.05bn.
Calgary-based Lightstream Resources had its borrowing base cut from C$550m to C$250m, less than the C$371m it had outstanding. It said on May 2 it had 90 days to repay the difference, or it would have to default on its debts.
Buddy Clark, a partner at Haynes and Boone, noted that if banks reset companies’ borrowing bases lower than the value of their outstanding debts, then the companies typically had five months to make up the difference. If they failed to do so, they defaulted. Avoiding that fate can be difficult, he said, if the companies had suspended capital expenditure or cut production to conserve cash.
“If you’re not drilling new wells, if you’re not replacing collateral, it can become a death spiral,” he said.
Banks and other investors in bank loans are turning to specialist law firms to maximise their recoveries. Zach Rosenbaum is the New York-based chair of the capital markets litigation group at Lowenstein Sandler, which focuses on helping lenders claw back proceeds from bust companies. He says his firm has recently “pivoted” from mortgage-related claims to oil.
“There’s usually a delay between market effects and this type of distress, but in the last six months I’ve seen more activity,” Mr Rosenbaum said. “For the moment, the recovery in the price of oil has not changed that.”
Bankers and analysts said equipment manufacturers were in a particularly tight spot, as big projects got mothballed with little prospect of revival. But all stressed that defaults were set to tick up elsewhere.
“It’ll get a lot worse before it gets better,” said Ramanan Krishnamoorti, chemistry professor at the University of Houston, adding that the current oil price in the mid-40s was not high enough to make companies’ reserves viable.
“Even at $60 a barrel oil, we’d be seeing a significant retrenchment and bankruptcies across the board.”
Hearing Citigroup makes positive comments on potential value in a takeover scenario
- Citi sees GIS worth $86/shr ( +35%)if it gets an approach; thinks 3G/Berkshire could take a look at GIS
GIS +1.47%...
Saudi Aramco Likely to Step Up Production
CEO says output would increase to meet rising global demand, particularly in U.S. and India
DHAHRAN, Saudi Arabia—Saudi Arabia’s state-owned oil company is likely to increase its production to meet rising demand this year, its chief executive said, as the company begins an expansion that includes a partial IPO and new refining capabilities.
“We’re seeing a global increase in demand,” Amin Nasser, the chief executive of Saudi Arabian Oil Co., known as Saudi Aramco, said at a news briefing Tuesday at the company’s headquarters. “We are meeting that call on us.”
Saudi Arabia, the world’s largest exporter of crude oil, is already pumping at near-record levels of about 10.2 million barrels a day. That output was part of an overall Saudi strategy for dealing with oil prices that collapsed more than 70% from June 2014 to January 2016: Pump flat out and compete with other countries for crude buyers.
The country no longer regulates its production levels to keep global supply and demand in balance and stabilize prices.
Mr. Nasser’s comments suggest the kingdom’s oil company isn’t changing course. Saudi Arabia’s output tends to increase in the summer to deal with rising air-conditioner use when temperatures in the kingdom reach scorching levels, but Mr. Nasser said Aramco would pump more to meet demand elsewhere, particularly in the U.S. and India.
Mr. Nasser said Aramco expected demand to increase by about 1.2 million barrels a day across the world this year, in line with other analysts’ estimates.
The CEO’s remarks come in the midst of great change for Saudi Arabia’s oil policy. A new oil minister, Khalid al-Falih, was recently named to succeed long-serving predecessor Ali al-Naimi amid a plan to move the kingdom’s economy away from its dependence on oil.
Saudi Arabia plans a public listing of up to 5% of Aramco in Riyadh and possibly other markets, potentially raising more than $100 billion and opening the company’s finances and reserves to more scrutiny.
The company would share more information as required for an initial public offering, but production levels are a “sovereign decision,” Mr. Nasser said.
The options include a share listing in Saudi Arabia, a dual listing with a foreign market, and listings in more than two places, Mr. Nasser said. Saudi officials have previously said New York, London and Hong Kong are potential options for a listing.
Saudi Aramco, the world’s largest oil company by output, is planning to expand as other big energy companies scale back during a period of sharply lower crude prices. Royal Dutch Shell PLC, BP PLC and other large independent oil firms have announced spending cutbacks, delayed projects and thousands of layoffs as revenue plummets.
Mr. Nasser declined to give an average figure for crude production this year but said the new output would come mostly from expansions of current fields.
Jim Krane, a fellow at Rice University’s Baker Institute where he studies Saudi energy policy, said the kingdom has no choice but to increase production if it wants to protect its share of crude markets and increase its refining capacity. He said the Saudis were also considering the possibility of oil demand falling in the future.
“If the Saudis want to avoid being stuck with most of their reserves stranded underground, the signs now say they better sell it off sooner rather than later,” Mr. Krane said.
Aramco plans to keep its maximum sustainable output capacity of 12 million barrels a day for now, but could expand it in the future if needed, he said. Saudi Arabia’s capacity is a closely watched figure because it shows how much the kingdom could help if there were a sudden shortage of oil supplies from elsewhere in the world.
Saudi Arabia came close to agreeing last month to cap its production at January levels but scuttled the deal with Russia, Venezuela and others at the last minute. Russia is also producing at near-record levels, while Saudi rival Iran is pumping new barrels into the market now that Western sanctions on its nuclear program have been lifted.
Mr. Nasser said global oil supplies and demand, which have been out of whack for almost two years, would come into balance around the end of 2016.
Aramco is looking at potential joint ventures in several countries, including Indonesia, India, the U.S., Vietnam and China, Mr. Nasser said.
“We are looking at the current market status that, even though challenging, is an excellent opportunity for growth,” Mr. Nasser said.
Saudi Arabia is also looking to increase its production of natural gas, with plans to nearly double its output in 10 years, he said. Earlier this year, Mr. Nasser had said Aramco wanted to raise its gas output to 23 billion standard cubic feet a day from about 12 billion cubic feet.
Saudi Aramco also plans to increase its refining capacity to eight million to 10 million barrels a day from its current capacity of about 5.4 million barrels a day. The expansion is part of Aramco’s plan to be the world’s leading energy-chemicals company by 2020 and represents the future of its fossil-fuels business.
Saudi Aramco has a total workforce of 61,907, of which 51,653 are Saudis, making it the largest employer of Saudi nationals in the kingdom. It is working with its suppliers and contractors to create 500,000 new jobs over the next decade, Mr. Nasser said.
Suppliers and contractors have about 35% Saudi employees, but Aramco is aiming for 70% Saudi employees by 2021, he said.