Stop the press! Apple is NOT the world’s most valuable company

The news reports are wrong. There is another company which is much, much bigger

“Apple is most valuable firm of all time” says the Guardian. As does the Daily Telegraph, the BBC, The Register and more than 1,200 other news sites around the world.

The logic: “Shares in the tech giant hit a high of $664.75 (£422.50) in Monday morning trading, valuing the company at more than $619bn. The price topped the $618.9bn Microsoft achieved in December 1999.

“In January, Apple surpassed oil firm Exxon Mobil for the first time to become the most valuable company on the planet. It now dwarfs Exxon’s $405.6bn market value by more than $213bn.”

The problem?

It’s wrong.

The world’s most valuable firm is Saudi Aramco, the national oil company of Saudi Arabia.

Saudi Aramco has proven reserves of 260 billion barrels of oil. That is a fifth of all the oil in the world. And let’s not forget the 283 trillion cubic feet of natural gas reserves (the fourth largest in the world).

It employs 56,066 people and comes with its own fleet of supertankers and network of refineries.

The industry journal Petroleum Intelligence Weekly ranks energy firms by asset size, and places Saudi Aramco as the world #1, ahead of the National Iranian Oil Co at #2, and ExxonMobile at #3. The Russian behemoth Gazprom scrapes in at #10.

Valuing a firm like this isn’t easy.

Looking at the oil market, BP, ranked #6 by PIW, is valued at £85bn at a p/e of 7.87. It has proven reserves of 17.75 billion barrels of oil.

Applying the same metrics to Saudi Aramco gives a value of $1.245 trillion for Saudi Aramco, or double the value of Apple.

But Saudi Aramco is a more desirable property than BP. Its oil is easier to extract than most of BP’s sites. (Offshore oil rigs are a nightmare to run; Saudi Aramco’s rigs sit in the desert.)

And Saudi Aramco is likely understating its reserves. It has plenty of black stuff to extract without hunting for more. So the real total of its assets may be significantly higher.

Further more, Saudi Aramco is a more stable company than Apple. The iPhone may be overtaken by HTC’s devices or Samsung, or some new Chinese firm we’ve never heard of. Steve Jobs, god rest his magnificent soul, is departed. Who knows what the future holds.  Anything could happen to Apple in the next five years.

But oil is a steady proposition. The only long term threat is nuclear power, but we are talking decades of slow change.

Saudi Aramco is the most appealing investment imaginable. No wonder the House of Saud does not fancy floating the firm.

Placing a value on the Saudi Aramco is difficult. We could be talking anywhere between two trillion dollars. Could be talking five. But there is simply no question that it dwarves Apple.