Saudi Aramco’s landmark IPO seen boosting transparency

Aramco will float shares in the entire company, not just its refining or distribution units, its chief executive Amin Nasser told Bloomberg in October.
Updated 22 December 2016

Saudi Aramco’s landmark IPO seen boosting transparency

Saudi Aramco’s initial public offering (IPO), slated for launch in early 2018, could improve corporate transparency in the Kingdom, draw additional foreign money into other Riyadh-listed stocks and enhance the country’s global standing.
The IPO, first outlined by Deputy Crown Prince Mohammed bin Salman earlier this year, would involve floating less than 5 percent of Aramco’s shares. Were it to raise $100 billion, as mooted by Bloomberg, it would be quadruple the size of the next largest IPO — China’s Alibaba, which generated $25 billion from its 2014 share sale.
Saudi officials have indicated Aramco, the Kingdom’s oil producer, would join Riyadh’s bourse and may also list on foreign exchanges; global markets will be scanning today’s 2017 budget announcement for any more details on the IPO.
“Obstacles in terms of transparency, depth of local markets and reservations about governance remain large,” Fitch Ratings wrote in a September note that gave a negative outlook for Saudi Arabia.
Aramco will float shares in the entire company, not just its refining or distribution units, its chief executive Amin Nasser told Bloomberg in October. Nasser said it would “very soon” reveal the investment banks advising on the flotation.
Aramco has appointed some IPO advisers including JPMorgan Chase and independent firm Michael Klein, according to media reports, with further advisers likely to be recruited. The oil producer has met banks including Rothschild & Co, Lazard and Moelis, Bloomberg reported in September.
One of the aims of listing Aramco on Riyadh’s stock exchange is that it would likely entice foreign investors to buy into other listed Saudi companies, especially in light of Deputy Crown Prince Mohammed bin Salman’s publicly stated aim to privatize other state-owned firms and international funds’ muted enthusiasm for Saudi equities since the market was opened up to direct foreign investment in June 2015.
“The Aramco IPO is not just going to help make the company more transparent but will also help the country become more transparent,” said John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh.
“The economic impact is beyond just attracting foreign investors in the local market but also placing Saudi Arabia on the global map of reform, diversification and progress.”
Valuation?
Guessing Saudi Aramco’s value has almost become a dinner party game, with estimates ranging anywhere from $2 trillion to $10 trillion. Such variances are an implicit recognition that markets are uncertain as to true size of Saudi Arabia’s oil deposits.
Officially, the Kingdom has 266 billion barrels of proven oil reserves, 18 percent of the global total, according to OPEC. But that data comes from Aramco itself and estimating reserves involves more guesswork than producers would like to admit.
“If Aramco’s much-touted IPO does go through, it will be difficult to put a reliable dollar figure on its value,” Dr. Yasser Al-Saleh, a former Aramco engineer and now faculty member at Dubai’s Mohammed bin Rashid School of Government wrote in a blog post earlier this year.
To go public, Aramco will have put its accounts — and oil reserve data — under independent scrutiny and as a state-run company it is likely to be shown as less efficient than its privately-owned counterparts abroad.

OPEC cut
Saudi Arabia, which extracts oil at a fraction of the price of many rival producers, accounts for about one-ninth of all oil production globally.
In November, OPEC surprised markets by agreeing its first output cut in eight years. Previously, the Kingdom had refused to rein in production, instead prioritizing the winning of market share. The imminent output cut sent prices soaring and Brent crude now trades at around $55 a barrel, a 2016 high but still less than half the peak price of 2014.
That rise, of course, helps bolster Aramco’s perceived worth and with a global shift towards greater energy efficiency and away from hydrocarbons, the push to list Aramco could reflect anxiety over the long-term oil price outlook.


Lead roles for Saudi stars as Okaz Nights concerts begin

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Updated 29 min 36 sec ago

Lead roles for Saudi stars as Okaz Nights concerts begin

  • Abadi Al-Johar and Dalia Mubarak shine in wonderful musical evening

TAIF: The Okaz Nights series of concerts began with a wonderful evening featuring Saudi stars Abadi Al-Johar and Dalia Mubarak at the Okaz Main Theater, which has been given a new look.

The concerts are part of Taif Season, which is presenting events throughout August. The concert with Al-Johar and Mubarak, which sold out quickly, was well received by the audience of more than 2,500.

The evening began at 9.30 p.m. with a collection of new and old songs from Mubarak, supported by 27 musicians. Al-Johar then greeted her with beautiful and famous songs.

Emirati singer Hussain Al-Jasmi also performed at the theater, which will host Syrian musical artist Asala Nasri on Aug. 28 and Ahlam Al-Shamsi on Aug. 30.