Aramco’s $2tn flotation is back on, says Saudi Arabia
Saudi Arabia has reignited plans for a $2tn mega-float of its state oil company, Aramco, just months after putting on hold the biggest public listing in history.
The Saudi energy minister, Khalid al-Falih, said on Tuesday that officials are working to list the company for the first time within the next two years.
Saudi Arabia is reportedly in talks with international investors over an initial public offering (IPO) once it has completed a merger with the petrochemicals company Saudi Basic Industries Corp (Sabic).
The ambitious plan for a partial float of Aramco, the world’s biggest oil company, is understood to have fallen apart last summer amid fears it might fail to achieve its eye-watering valuation.
The float was considered a centrepiece of Saudi plans to kick off an economic transformation by privatising part of its vast oil wealth. By 2030, Riyadh hopes to diversify its economy away from a near-total reliance on oil revenues and open the kingdom to international investment.
Falih said the planned float “was never fully suspended”. He said: “We have always been clear that the IPO will happen in the 2020-21 timeframe. We have never stopped talking about the IPO.”
Major banks including JPMorgan, Morgan Stanley and HSBC were picked to play a leading role in the world’s biggest float when the plan was first announced in 2016. It is not known whether the same banks are in talks with the Saudis this year.
Saudi Arabia’s standing in the international investment community was dealt a blow last year after the killing of the journalist Jamal Khashoggi at the hands of Saudi agents. A UN report has since found there is “credible evidence that the Saudi crown prince, Mohammed bin Salman, may be liable for the killing.
International banks brushed aside concerns about the Saudi state in Aramco’s record-breaking bond market debut only a few months later in April, after opening the the organisation’s books to reveal the biggest company profits in the world.
The once-secretive company reported earnings of $224bn (£171bn) for 2018, four times more than the profits reported by ExxonMobil, the world’s most valuable listed oil company.
The rare display of transparency helped raise $12bn after overwhelming interest from major international investors. The landmark deal aimed to raise $10bn but set a new record for an emerging market debt deal by securing investor offers of more than 10 times this amount.
Aramco’s debut trounced the kingdom’s sovereign bond market debut in 2016, which drew offers worth more than $67bn, and towered above the $52bn worth of offers for a similar deal offered by Qatar.
The strong international interest in Aramco’s bonds is likely to have emboldened plans to revisit a mega-float.
Falih confirmed speculation that the Saudis would resurrect the failed float after Riyadh brokered a deal between Organisation of Petroleum Exporting Countries (Opec) and its allies outside of the cartel to stabilise oil prices by cutting 1.2m barrels of daily oil production from the global market.
Opec agreed on Monday to keep the cuts in place for a further nine months in the face of rising US shale oil exports, which threaten to flood the market and drag down prices. It agreed the deal with an alliance of oil producers outside of the cartel, led by Russsia, in separate talks on Tuesday.