L&T shares fall on Saudi Aramco’s Safaniyah bid process delay

On February 19, Larsen & Toubro (L&T) witnessed a decline in its shares, triggered by reports of Saudi Aramco postponing the bid process for $10-billion orders linked to the Safaniyah oilfield projects. At 10:50 AM on Monday, L&T’s scrip on the Bombay Stock Exchange (BSE) recorded a 1 percent decrease, trading at Rs 3,352. This dip was attributed to L&T’s potential involvement in a competitive race to secure a significant Engineering, Procurement, and Construction (EPC) order linked to the Safaniyah oilfield.

News reports indicated that the delay in the Safaniyah expansion is a consequence of a directive from Saudi Arabia to cap production, as reported by CNBC-TV18 on Monday. Additionally, reports suggested that at least 10 Engineering, Procurement, Construction, and Installation (EPCI) deals associated with the further expansion of Aramco’s Safaniyah oilfield have been canceled.

In the quarter ending December 31, 2023, L&T successfully secured orders worth Rs 75,990 crore at the group level, showcasing a robust year-on-year growth of 25 percent. Particularly noteworthy was the fact that international orders amounted to Rs 50,562 crore during the same period, constituting a substantial 67 percent of the total order inflow.

Larsen & Toubro, a $23-billion Indian multinational, actively engages in engineering, procurement, and construction (EPC) projects, as well as hi-tech manufacturing and services, with a global footprint spanning over 50 countries.

Moreover, Saudi Arabia is reportedly considering plans for a follow-on share offering in its state oil company, Saudi Aramco, with the aim of raising at least 40 billion riyals ($10 billion) as early as February. This development was reported by Bloomberg News last month, citing sources familiar with the matter. The decision to pursue a follow-on share offering comes in response to the Saudi government’s directive for Aramco to halt its oil expansion plan, with the goal of achieving a maximum sustained production capacity of 12 million barrels per day (bpd). This target is 1 million bpd lower than the goal announced in 2020.