Saudi Aramco to sell 1.5 per cent stake, valuing company up to USD1.7T

DUBAI, UNITED ARAB EMIRATES (AP) – Saudi Arabia’s state-owned oil giant Aramco announced yesterday it will sell a 1.5 per cent stake in the company as it looks to raise as much as USD25.6 billion from the sale.

The newly released figures also revealed a valuation for the company that’s between USD1.6 trillion and USD1.7 trillion, a figure that fell short of the USD2 trillion mark Crown Prince Mohammed bin Salman had sought.

Still, a 1.5 per cent flotation could raise between USD24 billion and USD25.6 billion to help fuel the Saudi economy. Saudi Aramco announced it will have 200 billion regular shares, selling 1.5 per cent or what is three billion shares.

Aramco set a stock price range of 30 to 32 Saudi riyals, or USD8 to USD8.50 a share for investors.

The company is selling 0.5 per cent to individual investors, which will include Saudi citizens, residents of Saudi Arabia and Gulf Arab nationals, and one per cent to institutional investors, which could include major Chinese and Russian buyers.

An oil facility in Jubeil, about 600 kilometres from Riyadh, Saudi Arabia. PHOTO: AP

Aramco will announce the final price for the stock when the book-building period ends on December 5. Trading on the local Tadawul exchange in Riyadh is expected to happen sometime in mid-December.

The highly anticipated sale of a sliver of the company has been generating global buzz because it could clock in as the world’s biggest initial public offering, surpassing record holder Alibaba whose IPO raised USD21.8 billion on its first day of trading 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 per cent of global demand. The oil and gas company netted profits of USD111 billion last year, more than Apple, Royal Dutch Shell and Exxon Mobil combined.

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 USD75 to USD80 price range per barrel analysts say is needed to balance Saudi Arabia’s budget. Brent crude is trading at just over USD63 a barrel.

Prince Mohammed 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.

Despite Aramco’s profitability, the state’s control of the company carries a number of risks for investors. Two key Aramco processing sites were targetted by rockets and missiles in September, an attack which claimed by Iran-Backed Houthi rebels in neighbouring Yemen but which Saudi Arabia blamed on its regional foe Iran. The government also stipulates oil production levels, which directly impacts Aramco’s output.