Fundamental impact
The $11 billion lease‑back transaction gives Aramco an immediate, non‑recurring cash infusion that will shore up liquidity, fund near‑term capital‑expenditure projects, and support its generous dividend‑share‑buy‑back policy. From a cash‑flow standpoint the deal is a pure “in‑flow” at closing – the company will book the full $11 bn as cash on the balance sheet.
However, the lease‑back component creates a new, ongoing out‑flow. Aramrc will now have to pay a long‑term, fixed‑rate lease for the Jafurah mid‑stream assets it has transferred to the consortium. Those lease payments will be recorded as operating expense (or “lease‑cost”) and will therefore depress future EBITDA and net‑income relative to a scenario in which the assets remained fully owned. In other words, the transaction trades a one‑time cash boost for a permanent reduction in earnings‑generating capacity.
Earnings guidance
Because the lease cost will be incurred over the life of the contract, analysts will likely downgrade Aramco’s earnings guidance for the next 3‑5 years, even as the short‑term cash‑flow outlook improves. The net effect is a higher free‑cash‑flow per share in the near term but a lower earnings‑per‑share trajectory once the lease expense is fully reflected.
Trading implications
- Short‑term: The cash‑boost narrative is positive for sentiment. Expect a modest upside on the stock (AR) as investors price in the $11 bn liquidity, especially if the market is still digesting the news. A breakout above the recent resistance (≈ SAR 1,800) could be triggered on the next session.
- Medium‑to‑long term: The drag on earnings will be a head‑wind for valuation multiples. If analysts cut guidance, the price could face pressure around the next earnings window (Q4‑2025). Traders should watch for a pull‑back to the 200‑day moving average (≈ SAR 1,750) as the earnings impact materialises.
- Actionable: Consider a short‑term long position or a buy‑the‑dip if the price retreats to the 200‑day MA, with a stop just below the recent low (≈ SAR 1,730). Keep a watch‑list for any earnings‑guidance revisions; a downgrade would be a cue to trim or hedge the position.