Saudi Aramco IPO prospectus projects oil demand to increase in 20 Years

13 Novembre, 2019, 13:35 | Auteur: Auguste Feret
  • A billboard displaying an advert for Aramco

The prospectus said the state giant will sell up to 0.5 per cent of its shares to individual investors while it has still not decided on the percentage for larger institutional investors.

Saudi Aramco said it would start taking bids from investors on November 17 in a highly anticipated stock offering, as it released a prospectus that did not disclose the size of the sale or the pricing range.

Crown Prince Mohammad bin Salman is seeking to sell the shares to raise billions to diversify the Saudi economy away from oil by investing in non-energy industries.

Bankers think the long-awaited IPO will value Aramco around US$1.5 trillion.

The Saudi state company said its after-tax breakeven costs for producing fields were below $10 per barrel, compared with just over $20 per barrel for the UAE, more than $40 per barrel for Russian Federation, and nearly $50 per barrel for Nigeria.

Despite trying to untangle its operations and accounts from the state, the company said that the government will dictate production decisions and could direct it to undertake projects "outside the Company's core business".

Aramco may also change its dividend policy without prior notice to its minority shareholders, it said.

Among other risk factors, the oil company - the world's largest producer - said it was vulnerable to fluctuations in commodity prices, reliance on Asian consumers, political and social unrest and terrorism.

What's more in the 658-page prospectus?

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Based on the Kingdom's reserves, Saudi Aramco will be able to continue pumping as much as 11 million barrels a day of crude and condensate into the 2030s and possibly go as high as 13 million barrels a day in the 2040s.

The prospectus said the government will have a "statutory lockup period" for disposing of any shares after the listing for six months, and a contractual lockup period for 12 months.

Aramco does not appear to have any immediate plans to list more of the company on an worldwide exchange, although there have been talks with major exchanges in recent years. It's said that nearly 2% of the shares will be available for global investors.

Amin H. Nasser, President and CCEO of Saudi Aramco, stated: "Saudi Aramco's imaginative and prescient is to be the sector's pre-properly-known constructed-in energy and chemical substances company. Holding Aramco shares is an absolute gain", a Saudi with a twitter handle named Abdulrahman wrote.

Investors are also concerned about geopolitical risks. Saudis flooded banks with phone calls asking how to participate after Aramco announced bank mandates. The kingdom cut taxes on Aramco for a third time, revealed incentives for investors not to sell shares and is considering boosting dividends further.

Norway's sovereign wealth fund, the world's largest, does not plan to invest in Aramco, a Norwegian official told AFP.

It is unclear whether Aramco will get the $2 trillion valuation Prince Mohammed had hoped for, with investment research firm Bernstein estimating it could fall between $1.2 and $1.5 trillion.

Initial hopes for a 5 percent IPO on domestic and worldwide bourses were dashed past year when the process was halted amid debate over where to list Aramco overseas.

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