Aramco says it will sell 1.5% of company, valuing oil giant at $1.71 trillion
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Aramco says it will sell 1.5% of company, valuing oil giant at $1.71 trillion

Hotly awaited offering of Saudi oil behemoth worth at least $24 billion is scaled down from original plans, but could still rival biggest listing in history

During a trip organized by Saudi information ministry, a worker rides his bicycle at Aramco's oil processing facility in Abqaiq, near Dammam in the Kingdom's Eastern Province,  Sept. 20, 2019 (AP Photo/Amr Nabil)
During a trip organized by Saudi information ministry, a worker rides his bicycle at Aramco's oil processing facility in Abqaiq, near Dammam in the Kingdom's Eastern Province, Sept. 20, 2019 (AP Photo/Amr Nabil)

Saudi Aramco said Sunday it would sell 1.5 percent of the company in a blockbuster IPO worth at least $24 billion, which values the oil giant at up to $1.71 trillion, making it the most valuable company in the world.

“The base offer size will be 1.5 percent of the company’s outstanding shares,” the state-owned energy giant said in a statement that set the price range at 30-32 Saudi riyals per share ($8-8.5).

The offering is scaled down from original plans which had aimed for a $2.0 trillion valuation, but it could still rival the world’s biggest listing so far — the $25 billion float of Chinese retail giant Alibaba in 2014.

Saudi Aramco is the kingdom’s oil and gas producer, pumping more than 10 million barrels of crude oil a day, or some 10% of global demand.

An Aramco oil facility near al-Khurj area, just south of the Saudi capital Riyadh, September 15, 2019. (FAYEZ NURELDINE/ AFP)

The oil and gas company netted profits of $111 billion last year, more than Apple, Royal Dutch Shell and Exxon Mobil combined.

Trading on Saudi Arabia’s domestic exchange could begin as soon as Dec. 11, according to state-linked media.

Aramco does not appear to have any immediate plans to list more of the company on an international exchange, although there have been talks with major exchanges in recent years.

In a roughly 650-page prospectus released Saturday, Aramco said the offering period for investors will begin Nov. 17. It will close for individual investors on Nov. 28 and for institutional investors on Dec. 4. Aramco will price its shares on Dec. 5, according to the document.

The company stated its plans to pay out an annual dividend of at least $75 billion starting in 2020.

The kingdom’s plan to sell part of the company is part of a wider economic overhaul aimed at raising new streams of revenue for the oil-dependent country, particularly as oil prices struggle to reach the $75 to $80 price range per barrel analysts say is needed to balance Saudi Arabia’s budget. Brent crude closed Friday at around $62 a barrel.

Saudi Arabia’s Crown Prince Mohammed bin Salman attends a meeting with US Secretary of State Mike Pompeo in Jeddah, Saudi Arabia, on September 18, 2019. (Mandel Ngan/Pool Photo via AP)

Crown Prince Mohammed Bin Salman has said listing Aramco is one way for the kingdom to raise capital for the country’s sovereign wealth fund, which would then use that revenue to develop new cities and lucrative projects across Saudi Arabia.

The crown prince has stated that ownership of Aramco will ultimately be moved to the Public Investment Fund, meaning that the Saudi government will remain the largest shareholder.

Aramco’s low-cost oil production and its enormous reserves have helped transform the kingdom into one of the world’s top 20 economies, but the state’s control of the company carries a number of risks for investors.

An attack on two key Aramco processing sites in September, which Saudi Arabia has blamed on its regional foe Iran, highlighted how the company’s stability and security is directly linked to that of its owners — the Saudi government and its ruling family.

This AFPTV screen grab from a video made on September 14, 2019, shows smoke billowing from an Aramco oil facility in Abqaiq about 60km (37 miles) southwest of Dhahran in Saudi Arabia’s eastern province (AFP)

The document listed a number of risks for prospective investors to consider, including how the company’s cash flow is significantly impacted by international crude oil supply and demand and the price at which it is able to sell crude oil.

The prospectus noted that the Saudi government ultimately decides the country’s level of crude oil production. The kingdom has slashed Aramco’s production when it’s sought to boost oil prices.

Additional risks on the company’s finances include climate change concerns leading to a reduction of global demand for hydrocarbons, political and social instability in the Middle East and terrorism and armed conflict, according to the document.

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