For all its wealth, oil giant pays surprisingly little

Saudi Aramco Poised Make History with IPO, Valued Between $1.5-$2 Trillion

Saudi Aramco Poised Make History with IPO, Valued Between $1.5-$2 Trillion

The state-owned company however said there was no decision yet on the second part of the IPO to list on an global stock market, raising doubts that this much-anticipated step will ever happen.

After years of delay, Aramco said it plans to sell an unspecified number of shares on the Riyadh stock exchange, calling it a "historic" milestone for the energy giant which pumps 10 per cent of the world´s oil.

The energy giant has been hit by a recent string of attacks on its oil facilities, the latest and most serious halting the flow of 5.7 million barrels of oil per day - over half of its output - in drone strikes on September 14.

Last year, Aramco made an annual net profit of $111 billion, over a third bigger than the combined net income of the five super majors Exxon Mobil XOM.N , Royal Dutch/Shell RDSa.AS , BP BP.L , Chevron CVX.N and Total TOTF.PA . Having said that, the money generated by going public with Aramco, the country's most prized and profitable jewel, may not contribute enough in the grand scheme to fund Prince Mo plan.

Saudi retail investors will be eligible to receive one share for every 10 allotted shares if they continuously and uninterruptedly hold the shares for 180 days from the first date of trading and listing on the exchange, Aramco said in the statement. But the project was shelved amid concerns about legal complications in the United States, as well as doubts about the USD$2 trillion valuation sought by bin Salman - only to be revived earlier this year after Aramco pulled off a successful global bond sale.

"Aramco is the only oil producer in Saudi Arabia", said Vandana Hari, CEO of the Vandana Insights group of experts, based in Singapore.

Sources have said Aramco could offer 1%-2% of its shares on the local bourse, raising as much as $20 billion-$40 billion.

And then there's Aramco's environmental record.

Credit rating agency Fitch recently downgraded Saudi Arabia's rating from A+ to A, citing "increased geopolitical and military tensions in the Gulf region", in addition to "the vulnerability of Saudi Arabia's economic infrastructure, and continued deterioration in Saudi Arabia's fiscal and external balance sheets".

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For the people of Saudi Arabia, the IPO is a huge deal. But getting its books ready has taken until now, and bankers have advised that the valuation should instead be around $1.5 trillion. The original plan to list Aramco in either NY or London has been dropped in favour of a Riyadh-only flotation for now.

The listing comes as part of Saudi Crown Prince Mohammed bin Salman plans to diversify the country's economy and create the world's most valuable listed company.

April 24, 2017 HSBC has been formally mandated as an adviser on IPO of Saudi Aramco, HSBC's chief executive said.

The government has reportedly pressed wealthy Saudi families to invest in the IPO and is seeking to ease lending restrictions for ordinary citizens to buy a stake in the company.

March 30, 2017 Saudi Aramco formally appointed JPM, Morgan Stanley and HSBC as worldwide financial advisers for its IPO, sources familiar with the matter tell Reuters.

If Aramco was valued at $2tn, the shares would raise the $100bn (£77bn) the crown prince needs for his ambitious redevelopment plans for Saudi Arabia, where unemployment is more than 10%.

It is a fact that the second-biggest oil reserves are in Saudi Arabia, after Venezuela. Senior leaders "see themselves as stewards of this incredible national resource", she said.

An announcement from the kingdom's Capital Market Authority announcing its approval for the share sale served as a starting gun for an IPO promised by Crown Prince Mohammed bin Salman since 2016.

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