State oil giant Saudi Aramco could be valued at up to $1.7 trillion, according to a price range announced for the upcoming listing of this company that produced 10.3 million barrels per day last year.
Even though crown prince Mohammed bin Salman had initially estimated a value of $2 trillion; the company’s potential market value would stand between $1.6 and $1.7 trillion.
Saudi Aramco announced it plans to sell 1.5% of the company or 3,000 million shares. According to Reuters, the indicative price range for the shares is 30 Saudi riyals ($8.00) to 32 riyals, valuing the initial public offering (IPO) up to as much as 96 billion riyals ($25.60 billion).
Up to now, the operation is restricted to the Saudis and foreign institutions that have been authorized to invest in the kingdom’s stock exchange.
According to the company’s results, their reserves stood at 260,200 million barrels of oil equivalent in 2017. Last year, Saudi Aramco obtained a net income of $111 billion. This is more than a third above the net income reported by the sector’s five “majors”; ExxonMobil, Shell, BP, Chevron, and Total.
The Success of the IPO
Crown prince bin Salman already gave the go-ahead for the Initial Public Offering and affirmed that the listing is backed by local investors.
The awaited listing is scheduled for December 11 and constitutes the most important shift in Saudi Aramco since the company was nationalized in the 1980s.
This partial privatization through the IPO was initially proposed by Prince bin Salman in 2016. However, it was delayed on several occasions since international investors objected the company’s $2 trillion valuation.
Over the past weeks, Saudi Aramco executives have been in talks with investors from global institutions. It has also approached governments in the Gulf and Asia, including China. The most recent meetings include the ones held last week with state-owned Malaysian oil company Petronas, invited to the IPO.
Saudi Aramco focusing on its Vision 2030 program
This rapprochement comes as Petronas is nearing the commencement of operations at a petrochemical and refining project carried out jointly with Aramco in the South of Malaysia. The project will entail an investment of $27 billion; it could produce 750,000 tons of polyethylene and 900,000 tons of polypropylene a year.
Aramco’s listing is a key component of the Prince’s Vision 2030 plan, intended to achieve a structural reform of the country’s finance and lower dependence on oil. In this sense, the state-controlled Public Investment Fund would become an international investment center.
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