Saudi Arabia formally starts long-anticipated IPO of state-run oil giant

Saudi Arabia has formally started its long-anticipated initial public offering (IPO) of the state-run oil giant Saudi Aramco.

The kingdom’s Capital Market Authority (CMA) made the announcement early on Sunday, which will kick-start the firm floating some of its shares on Riyadh’s Tadawul stock exchange.

Analysts believe as much as 3% of the world’s largest oil and gas company will initially be listed on Tadawul.

No timeline for the IPO was offered – but last week, Saudi’s state-owned TV channel Al Arabiya reported that pricing for the stock will begin on 17 November, a final price will be set on 4 December, and trading will commence on 11 December.

The CMA said: “The company’s prospectus will be published prior to the start of the subscription period.”

Crown Prince Mohammad bin Salman has ambitious plans to develop new industries in Saudi Arabia
Image: Crown Prince Mohammad bin Salman has ambitious plans to develop new industries in Saudi Arabia

It is hoped other shares – about 2% – can later be put on a foreign exchange, possibly in London, Hong Kong or New York, as part of Crown Prince Mohammed bin Salman’s plan to open up the Saudi Arabian economy to international investors.

He is hoping for a very optimistic $ 2tn (£1.5tn) valuation for Aramco, which produces 10 million barrels of crude oil a day and provides about 10% of global demand.

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In comparison, Apple and Microsoft are valued at $ 1tn (£777bn) each.

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%.

Drone attacks targeted a major Saudi Aramco processing facility and oilfield in the kingdom's east
14 Sept: Saudi Arabia oil plant ablaze

Moments after announcing the IPO had been given the go-ahead, Aramco said it posted a net income of $ 68bn (£52.6bn) during the nine-month period ending on 30 September.

It said the company’s revenues and other income related to sales for the same period amounted to $ 244bn (£188.6bn).

The crown prince promised an IPO in 2016 but the flotation has been delayed several times by a variety of issues, including the trade war between China and the US, and increased crude oil production by America which has depressed energy prices.

It experienced a major setback in September when an Aramco oil field and facility were attacked, affecting more than half of Saudi Arabia’s oil exports.

Saudi and the US blame Iran, which backs the Yemeni Houthi rebels who said they were behind the attack. The Houthis have been in conflict with a Saudi-led coalition in Yemen since 2015.

But Aramco said it does not expect the effect of the attacks to have a material impact on its business, financial condition or its operational results.

Some investors were spooked by the attack, with one ratings company downgrading the oil giant.

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