Best Approach for IPO being Weighed for Aramco by Saudi Arabia

While the government considers how to meet all its objectives from the sale of a stake in the world’s biggest oil company, the initial public offering of Saudi Arabian Oil Co. remains on track, said the kingdom’s Energy Minister.

Energy Minister Khalid Al-Falih said in Los Angeles on Thursday that in early 2018, Saudi Arabia hopes to list the company, also known as Saudi Aramco. Falih said that as Saudi Arabia pursues a plan to diversify its economy, optimizing Aramco’s value for both potential shareholders and for the kingdom is being considered by the government and this process requires time.

“We have to optimize — optimize for the kingdom’s interest as the owners of the company and the owners of the resource today, optimize for the investors who have to enter into this. Their interests have to be protected,”  Al-Falih said.

As part of Deputy Crown Prince Mohammed bin Salman’s initiative to transform the kingdom’s economy for a post-hydrocarbon age, Saudi Arabia plans to raise about $100 billion by selling about 5 percent of Aramco. Al-Falih said two-thirds of the economy being accounted for by the private sector is the ultimate goal of the government.

Al-Falih said that achieving the maximum IPO valuation was only part of the considerations and it extends beyond it. He said that creation of the “the most valuable asset company” in terms of “its capability, its potential to grow, its potential to create value for all of the stakeholders” is the aim of the kingdom.

He added that decision on where to list the company is yet to be taken. Each of the vying exchanges have strengths and weaknesses, and — in some cases – risks even as all the major exchanges are “vying” to host Aramco. Factors in “terms of legal exposure and tax exposure” have presented drawbacks for some locations, he said.

He said that once Saudi Arabia’s national stock exchange, the Tadawul’s, expansion plans are complete, accommodating a company on the scale of Aramco will be possible for the exchange. After allowing limited foreign direct investment last June, international participation is being increased at the Tadawul, one of the world’s most closed stock markets.

Sitting atop one-fifth of the globe’s petroleum reserves, Saudi Arabian Oil Co., better known as Aramc0, is a sprawling state-owned producer. Compared to the top four publicly traded oil companies combined this oil producer pumps more crude into the market.

While no one really knows what it’s worth because its profits are shrouded in secrecy, reports are that this company is values at about four times the biggest technology giants – at more than $2 trillion.

Ahead of informal OPEC talks scheduled for next month in Algeria, his views on oil market conditions were also given by Al-Falih. He said that more substantial action, such as output cuts, aren’t necessary because the global oversupply is already subsiding while it would be “positive” for producers to agree on limiting production.

(Adapted from CNBC)

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