Saudi oil giant Aramco heads for record-setting market debut

RIYADH: Saudi Arabia announced on Sunday the stock market debut of energy giant Aramco in what could be the world’s biggest IPO.

After years of delay, Aramco said it plans to sell an unspecified number of shares on the Riyadh stock exchange, calling it a “historic” milestone for the world’s most profitable company which pumps 10 percent of the world’s oil.

However, the state firm said there were no current plans for an international listing, indicating that the long-discussed goal for a second offering on a foreign bourse had been put aside.

The launch, which has been approved by regulators, underpins Crown Prince Mohammed bin Salman’s ambitions to overhaul the kingdom’s oil-reliant economy, with tens of billions of dollars needed to fund megaprojects and new industries.

With analysts saying that Aramco could be valued at up to $1.7 trillion, the initial public offering (IPO) is potentially the world’s biggest, depending on how much of the company it decides to sell.

“Today marks a significant milestone in the history of the company and important progress towards delivering Saudi Vision 2030, the kingdom’s blueprint for sustained economic diversification and growth,” Aramco chairman Yasir al-Rumayyan said.

The final offer price and the number of shares to be sold “will be determined at the end of the book-building period,” said the firm headquartered in the eastern city of Dhahran.

Aramco had initially been expected to sell a total of five percent on two exchanges, with a first listing of two percent on the Tadawul Saudi bourse followed by a three percent listing on an overseas exchange.

“For the (international) listing part, we will let you know in due course. So far it’s only on Tadawul,” Rumayyan said amid reports it was struggling to get institutional investors on board due to questions over transparency and governance.

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Rumayyan said the valuation should be determined after the investor roadshow. CEO Amin Nasser told the same news conference that Aramco plans to release the prospectus on Nov. 9.

To help get the deal done, Saudi Arabia is relying on easy credit for retail investors and hefty contributions from rich locals.

First suggested by the Crown Prince in 2016, the IPO was delayed several times, reportedly due to his dissatisfaction with the valuation of the firm, which fell short of the hoped-for $2 trillion.

Last week, Energy Intelligence cited sources as saying they expect the Saudis to settle on a valuation of $1.6 trillion to $1.7 trillion. The company will spend the next 10 days talking to investors and sounding out their interest and the price range will follow.

Aramco, which makes Saudi Arabia the world’s top energy exporter, is seen as the kingdom’s crown jewel and the backbone of its economic and social stability.

The confirmation of the sale of shares in the oil giant, whose formal name is Saudi Arabian Oil Co, comes about seven weeks after the crippling attacks on its oil facilities, underlining Saudi Arabia’s determination to push on with the listing regardless.

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Its 2018 net profit of $111.1 billion is higher than the profits of Apple, Google and Exxon Mobil combined.

Aramco only began releasing interim financial results recently, but in its push for transparency, the secretive company also released Sunday results for the nine months to September, saying net profits came in at $68 billion.

The government is reportedly seeking to get wealthy Saudi families to invest in the IPO and to ease lending restrictions for ordinary citizens to buy a stake in the company.

Some Saudi commentators have also sought to promote investment in the stock as a patriotic duty, although observers pointed to the perils of the strategy.

Aramco said it does not expect the Sept. 14 attack, which targeted plants at the heart of Saudi Arabia’s oil industry and initially halved its production, would have a material impact on its business, operations and financial condition.

Aramco accounted for about one in every eight barrels of crude oil produced globally from 2016 to 2018, it said on Sunday.