Saudis Tell 'Davos in Desert' Aramco IPO on Track for 2018



(Bloomberg) -- Saudi Arabia reassured global investors that it’s on track to sell shares in oil giant Aramco in 2018 as the who’s who of global finance and business gathered in Riyadh for a conference dubbed the “Davos in the Desert.”

Yet, for the first time, Saudi officials made a clear distinction between the preparatory work, which they said will be completed on time, and the decision to go ahead with the IPO, which is in the hands of the government. 

The kingdom plans next year to sell a stake in Saudi Arabian Oil Co., as the world’s biggest oil exporter is known formally, Yasir Al-Rumayyan, the head of the country’s sovereign Public Investment Fund, said on Tuesday in the capital, dispelling reports that the share sale would be delayed. 

“Things are on track for 2018,” Aramco Chief Executive Officer Amin Nasser said. But when asked if that included both the domestic and international IPO, he hedged his response: “That decision will be decided by the shareholder, not by the company. The shareholder will make the decision regarding the venues. We have done an assessment, and you have to appreciate the size of data and due diligence done in each market; that’s available, and it’s reviewed now and the decision will come in due course.”

Largest Offering

State-run Aramco lies at the heart of Saudi Arabia’s long-term strategy to wean its economy off oil. The government plans to sell about 5 percent of Aramco by the end of 2018 in what could be the world’s largest initial public offering. People familiar with the situation said earlier this month that Saudi Arabia is wondering whether to delay the international portion of the offering until at least 2019.

With just a bit more than a year to fulfill the 2018 target, the timetable for all the preparatory work is now getting tighter, people familiar with the matter told Bloomberg News last month, explaining that contingency plans were in place in case of a delay into 2019.

The government is currently assessing options for a location for the international listing, and there are no talks with Chinese investors about taking a strategic stake in the Aramco IPO, Nasser said.

London and New York exchanges are vying for a role in Aramco’s offering, with Hong Kong, Singapore, Tokyo and Toronto also trying to attract the sale. Aramco has hired JPMorgan Chase & Co., Morgan Stanley, HSBC Bank Plc, Moelis & Co. and Evercore Inc. to advise on the IPO. Independent Wall Street consultant Michael Klein is advising the oil ministry.

Eclipse Alibaba

The government has said the sale of a 5 percent stake could value Aramco at as much as $2 trillion, though analysts have tended to give lower estimates. If Saudi Arabia achieves its valuation, the stake it plans to sell would raise about $100 billion. That would eclipse the record $25 billion Alibaba Group Holding Ltd. raised in its IPO in 2014.

Aramco boosted production to an annual record last year before the kingdom led the Organization of Petroleum Exporting Countries and allied producers to curb output to stem a global glut. In May, OPEC and its partners including Russia extended their agreement for nine months through March 2018 because the oil market had failed to re-balance.

The three-day Riyadh conference gathered some of the finance world’s most influential people including HSBC Holdings Plc’s Chief Executive Officer Stuart Gulliver, BlackRock Inc. Chairman Larry Fink, Credit Suisse Group CEO Tidjane Thiam and International Monetary Fund managing director Christine Lagarde.

As the first day of the event drew to a close, Saudi Minister of Energy and Industry Khalid Al-Falih sought to convince the attendees of why Aramco was such a compelling investment in a world that is gradually shifting away from fossil fuels to renewable energy.

“Aramco is by far the lowest-cost producer” with exclusive access to about a quarter of the world’s conventional crude resources, Al-Falih said. Regardless of what happens to oil demand growth or the shift to electric cars “Saudi Aramco is going to be the supplier of last resort and I am certain that the last barrel that gets produced globally is going to be here in Saudi Arabia."

To contact the reporters on this story: Javier Blas in Riyadh at jblas3@bloomberg.net; Matthew Martin in Dubai at mmartin128@bloomberg.net. To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net James Herron, John Deane.



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