Saudi Arabia will sell under 5% of state oil firm Saudi Aramco through an IPO expected to value the firm at over $2 trillion.
The Saudi Arabian Oil Co., the world’s largest energy firm, is planning to list less than 5% of its value on stock exchanges in Riyadh and possibly the U.S., the kingdom’s deputy crown prince said Monday, setting up one of the largest IPOs ever. By listing even a tiny fraction of the company, known as Saudi Aramco, the offering would create one of the world’s most valuable energy firms. Prince Mohammed bin Salman said the company was worth between $2 trillion and $3 trillion, meaning a 5% listing would give it a potential value of $100 billion to $150 billion. That would be more valuable than U.K. oil giant BP PLC. The listing would create a new threshold of public accountability for a secretive state-run company that currently doesn’t disclose its annual revenues, profits and debts. It could also bring new scrutiny to Saudi Arabia’s proved reserves of crude oil, which have stood at around 260 billion barrels for years without significant new finds, even though the company pumps more than 3 billion barrels of oil or more a year. “Aramco’s listing has many benefits, the most important and before everything is transparency,” the prince said in an interview with television network Al Arabiya. “It will be under the supervision of all Saudi banks, all analysts, all Saudi thinkers. Even more, all international banks and research and planning centers in the world will monitor it intensively.”
"If one percent of Aramco is offered to the market just one percent it will be the biggest IPO on earth," he said. Aramco was once run by Americans but has long been a Saudi state corporation. It dwarfs all in the industry, with crude reserves of 265 billion barrels, more than 15 percent of global oil deposits. It produces more than 10 million barrels per day, three times as much as the world's largest listed oil company, ExxonMobil, while its reserves are more than 10 times bigger. If Aramco were ever to go public, it would probably become the first company to be valued at more than $1 trillion. "Less than 5 percent from the parent company ... we are trying to separate it and make Aramco a holding company," Prince Mohammed said. The listing of Aramco would be on the Saudi stock market, he said, adding that one idea being studied was to set up a fund in the U.S. market which would buy shares in Aramco to help bring liquidity.
As the world's largest oil exporter, the bulk of Riyadh's state revenues come from energy exports. But with crude prices extending their declines — the per-barrel price of global benchmark Brent is down 60 percent since the rout first started in June 2014. The country logged a record $98 billion budget deficit for 2015. Analysis from McKinsey, before the announcement Monday, suggested the kingdom could double gross domestic product (GDP) growth from 3.4 percent in 2015 and create as many as six million jobs by 2030 by focusing on eight non-oil sectors, including manufacturing, mining, tourism, healthcare and finance.