Aramco plans to offer shares in all operations

09 October 2016

Initial public offering will not be limited to refining or distribution operations

Saudi Aramco plans to sell shares in the entire business and not just in its refining or distribution operations.

The state-controlled oil and gas giant will “very soon" announce a list of investment banks and consultants advising it on the initial public offering (IPO), CEO Amin Nasser was quoted as saying by news agency Bloomberg. Aramco’s IPO is planned for 2018 on the Saudi Stock Exchange (Tadawul) and the kingdom is also considering bourses in London, Hong Kong and New York as foreign listing destinations, he said.

Riyadh aims to list less than 5 per cent of Aramco, which, according to the kingdom’s Deputy Crown Prince Mohammed bin Salman al-Saud, could value the firm at more than $2 trillion, making it the world’s largest listed company.

“We need to do a lot of internal work to prepare for this listing,” Nasser said. “We are listing a part of the entire company, and not just downstream.” 

Saudi Arabia, Opec’s biggest oil producer, relies heavily on the sale of crude for revenues; the resource accounted for more than 80 per cent of its income in 2015. The kingdom is facing an estimated $87bn deficit this year, and has embarked upon an austerity campaign, which has seen the restructuring of subsidies, and the reduction of the public wage bill, including a 20 per cent cut in ministers’ salaries and slashing the perks of government sector employees. The country has borrowed from local and international markets to plug the widening budget deficit and has drawn down on its foreign reserves to meet expenses.

Aramco is at the heart of the government’s National Transformation Programme (NTP), which lays emphasis on part-privatising some of the state assets. Riyadh hopes to raise about $100bn from the IPO.

“There are no obstacles for the IPO of Aramco,” Nasser said, adding that the process is going very smoothly, Aramco is on target and has achieved a lot of progress so far. “People have to appreciate the size of Aramco and its complexity,” he said.

Aramco, which has been the kingdom’s main revenue-earner for the past eight decades, will review its budget “shortly,” he said. “Our spending programme is active and evolving.”

The oil major is preparing to give investors the first-ever peek at its accounts, unfolding the financial details of one of the world’s most closely held companies next year. Aramco is overhauling accounts to be able to publish its 2017 financial year in an industry-friendly format, according to news reports. It also plans to reveal backdated accounts in this format for its 2015 and 2016 financial years to investors.

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