Members of the media chat before the start of a press conference by Aramco at the Plaza Conference Center in Dhahran, Saudi Arabia, Sunday. -AP
Saudi Arabia formally began an initial public offering Sunday of a sliver of oil giant Saudi Aramco after years of delay, hoping international and local investors will pay billions of dollars for a stake in the kingdom's crown jewels.
An approval by Saudi Arabia's Capital Market Authority served as the starting gun for an IPO promised by Crown Prince Mohammed bin Salman since 2016. But unlike traditional IPOs, Saudi Aramco offered no hoped-for price range for its shares nor any idea how much of the firm would be offered to investors on Riyadh's Tadawul stock exchange.
Analysts say the kingdom likely hopes local investors will push its share prices toward a desired $2 trillion valuation and buoy that price ahead of any possible further listing abroad. Saudi Aramco also made a point in its filings to highlight its profitability and low costs through newly released data once held as a state secret by the Al Saud royal family, euphemistically referred to by the company as its "current shareholder."
However, economic worries, the trade war between China and the US and increased crude oil production by the US has depressed energy prices. A Sept. 14 attack on the heart of Saudi Aramco already spooked some investors, with one ratings company already downgrading the oil giant.
"We want to share the Aramco shares with the citizens of Saudi Arabia," said Yasir al-Rumayyan, the governor of Saudi Arabia's Public Investment Fund. "We want to get financial investors from all over the world." It's hard to overstate the power of the oil firm, known formally as the Saudi Arabian Oil Co. It produces over 10 million barrels of crude oil a day, some 10% of global demand. The firm's net income in 2018 was $111.1 billion, far beyond the combined net income of oil giants BP PLC, Chevron Corp., Exxon Mobil Corp., Royal Dutch Shell PLC and Total SA.
Saudi Arabia's oil sits close to the surface in large pools, making it far cheaper to extract. Saudi Aramco also has proven liquid reserves of 226.8 billion barrels, the largest of any company in the world and "approximately five times larger" than those held by the five oil giants, according to the firm's IPO documents.
That's led to a clamoring from investors for Saudi Aramco stock since Prince Mohammed announced plans in 2016 for a two-phase IPO of 5% of the firm in the kingdom and abroad.
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