Saudi Aramco to proceed with possibly world’s largest IPO

Saudi Arabia’s national oil company Saudi Aramco has announced its intention to proceed with an initial public offering – possibly record-breaking – on the Main Market of Tadawul – The Saudi Stock Exchange.

The Saudi government intends to sell a portion of its shares in Saudi Aramco, the world’s largest integrated oil and gas company, and the Capital Market Authority approved the Company’s application for the initial public offering on November 3, 2019.

In a statement on Sunday Amin H. Nasser, President and Chief Executive Officer of Saudi Aramco said the IPO was a proud moment in the company’s history, promising long-term value creation to its shareholders.

Saudi Aramco – which had a net income of $111.1 billion last year – did not announce the date of the Initial Public Offering nor on the pricing or the volume of shares to be sold.

According to the announcement, the final offer price, the number of shares to be sold, and the percentage of the shares to be sold will be determined at the end of the book-building period.

Reuters has said, citing unnamed sources, that the IPO could be the largest ever, as the company could raise between $20 and $40 billion by offering 1%-2% of its shares on the local exchange. The Guardian has said that the company might float 1% to 3% of its shares on the Saudi Exchange, and raise $40-45 billion. The Chinese online sales giant Alibaba’s $25 billion IPO in 2014 is still holding the record as the largest ever.

Also, it has been reported that Saudi Aramco could reach a valuation of $1.5 trillion, surpassing Apple’s and Microsoft’s market caps of $1.14 trillion and $1.1 trillion, respectively.

Lowest cost, biggest reserves

In its announcement, Saudi Aramco presented its strengths compared to other international oil companies, such as low production price, huge reserves, refining capacity, and low carbon of its crude oil production, among others.

Saudi Aramco said that as at December 31, 2018, its proved liquids reserves were approximately five times larger than the combined proved liquids reserves of the Five Major IOCs. In addition, the company’s net refining capacity as at December 31, made it the fourth largest integrated refiner in the world based on a comparison with the most recently available third party capacity data, the company said.

According to Saudi Aramco, as at December 31, 2018, reserves were 256.9 billion barrels of oil equivalent. The Company’s oil equivalent reserves were sufficient for proved reserves life of 52 years, which was significantly longer than the 9 to 17 year proved reserves life of any of the Five Major IOCs based on publicly available information.

The company’s oil equivalent reserves consisted of 201.4 billion barrels of crude oil and condensate, 25.4 billion barrels of NGLs and 185.7 trillion standard cubic feet of natural gas.

Saudi Aramco also boasted the fact that the company is the lowest cost producer globally, with average upstream lifting cost was SAR 10.6 ($2.8) per barrel of oil equivalent produced in 2018, thanks to the”the unique nature of the Kingdom’s geological formations, favourable onshore and shallow water offshore environments in which the Company’s reservoirs are located, synergies available from the Company’s use of its large infrastructure and logistics networks, its low depletion rate operational model and its scaled application of technology.”

Significant step towards Vision 2030

Yasir Othman Al-Rumayyan, Chairman of the Board of Directors of Saudi Aramco and Governor of the Public Investment Fund said: “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. Since its formation, Saudi Aramco has become critical to global energy supply. With a focused, long-term strategy and staunch governance, Saudi Aramco demonstrates world-class standards of operational performance and financial discipline.

The Company’s strategy is underpinned by long-term, exclusive access to the Kingdom’s unique hydrocarbon resources, which it manages in order to optimize production and maximize long-term value. At the same time, the Company seeks to preserve the low carbon intensity of its crude oil production to demonstrate its ongoing commitment to sustainability. The Company has a strong track record of creating value for its current shareholder, the Government. I look forward to welcoming new shareholders who, I am confident, will benefit from the Company’s reliability and continued growth.”

CEO: Long-term value for shareholders

Amin H. Nasser, President and Chief Executive Officer of Saudi Aramco, said: “Saudi Aramco’s vision is to be the world’s pre-eminent integrated energy and chemicals company. Over the last three years, we were responsible for one in every eight barrels of crude oil produced globally and our proved liquids reserves, at the end of 2018, were five times larger than the combined proved liquid reserves of the Five Major IOCs.

“Our mission is to provide our shareholders with long-term value creation through crude oil price cycles by maintaining our pre-eminence in oil and gas production, capturing additional value across the hydrocarbon value chain and profitably growing our portfolio. Building on our position amongst the world’s least carbon-intense sources of crude oil, Saudi Aramco aims to grow its business sustainability by leveraging technology and innovation to lower our climate impact. We deploy technology, with the aim of producing oil and gas ever more efficiently, reliably and sustainably.”

Saudi Aramco has appointed Citigroup Saudi Arabia, Credit Suisse Saudi Arabia, Goldman Sachs Saudi Arabia, HSBC Saudi Arabia, J.P. Morgan Saudi Arabia Company, Merrill Lynch Kingdom of Saudi Arabia, Morgan Stanley Saudi Arabia, NCB Capital Company and Samba Capital & Investment Management Company  as joint financial advisors (collectively, the “Joint Financial Advisors”)

Offshore Energy Today Staff

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