Saudi Aramco IPO prospectus ‘virtually ready,’ with new reserves valuation likely to top 260bn barrels

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Saudi Aramco Chief Executive Amin Nasser said: ‘There is a lot of demand for the listing of Saudi Aramco which we will see when we go on our roadshow.’ (Reuters)
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The Saudi Aramco facility in Dammam city. A reserves estimate materially higher than 260 billion barrels would have important implications for the company’s valuation in an IPO. (AFP)
Updated 27 March 2018

Saudi Aramco IPO prospectus ‘virtually ready,’ with new reserves valuation likely to top 260bn barrels

NEW YORK: The prospectus for the initial public offering (IPO) of Saudi Aramco is “virtually ready,” including a revised valuation of the oil giant’s reserves, sources close to the company’s plans told Arab News.

The news came as Saudi Arabia’s Crown Prince Mohammed bin Salman said OPEC is seeking to cooperate with Russia on oil supplies for the next 10-to-20 years. The crown prince, currently leading a Saudi delegation in the US, added that OPEC has agreed on the general outlines for long-term oil supply cooperation with Russia.

Sources close to Aramco in New York, who declined to be identified because details of the prospectus were not in the public domain, said the plans for an IPO were on track for later this year, and that the prospectus was awaiting government approval and some finalizing of details, like valuation and listing venue. “There are a few spaces left blank but (the prospectus) is almost ready to go,” a source said.

News that the reserves valuation is complete will be a significant boost for the IPO planning process. Some stock exchanges impose tight restrictions on reserves estimates by oil companies. The Aramco valuation has been completed on the basis of a sample of Aramco’s oil fields in the Kingdom by DeGolyer and MacNaughton, a petroleum consulting firm based in Dallas, Texas.

Aramco’s publicly stated reserves have for a long time been reported by the company at a level of around 260 billion barrels, but the person said that DeGolyer’s new assessment could show a “significant” increase from that level. A reserves estimate materially higher than 260 billion barrels would have important implications for the company’s valuation in an IPO.

There have been reports in some outlets that Aramco’s advisers were struggling to meet the valuation of $2 trillion put on the company when the IPO was announced two years ago, and that investors were less than enthusiastic about what would be the biggest IPO in history.

Chief Executive Amin Nasser used an television interview in the city to confirm that the IPO was still on track for the second half of 2018, and sought to counter suggestions that American investors were “cool” on the potential listing.

“I think there is a lot of investor appetite. There is a lot of demand for the listing of Saudi Aramco which we will see when we go on our roadshow. Preparations have never stopped. We always said we’d be ready as a company for a listing in the second half of 2018,” Nasser told Bloomberg TV.

He added that the venue and timing of the IPO were decisions that would be made by the government of Saudi Arabia.

He indicated that an IPO with an international element was still in the company’s plans. “There are a lot of venues to list in other than the Kingdom, for sure,” he said.

Sources close to the plans said however that the deadline for a listing on a New York stock market was pressing, and if Aramco did not announce its plans soon it could be too late to float shares on a US exchange this year. A listing in London, where the regulations are lighter, would still be possible.

However, a two-stage IPO — first on the Riyadh stock exchange, the Tadawul, with a commitment to New York or London later — was still an option under consideration, the person said.

Aramco has been gauging investor sentiment in a series of meetings this year with investing institutions. A major topic of interest is the level dividend Aramco will pay investors when it is listed.

Nasser told Bloomberg that Aramco was considering a dividend comparable with the 6 percent yield that some big independent oil companies pay investors. “We will be competing with the best for sure,” he said. Potential investors would be informed of dividend plans on the roadshow, he added.

Saudi Arabia a ‘pioneer’ in energy transformation, minister tells Davos

Updated 23 January 2020

Saudi Arabia a ‘pioneer’ in energy transformation, minister tells Davos

  • Prince Abdulaziz says Kingdom has a duty to play its part in the energy transformation away from fossil fuels
  • He pledges that Saudi Arabia’s entire power sector will change to gas and renewable energy by 2030

DAVOS: Saudi Energy Minister Prince Abdulaziz bin Salman mounted a strong defense of the Kingdom’s record on climate change and clean energy production at a special event during the annual meeting of the World Economic Forum in Davos.

On a panel titled, “The Future of Fossil Fuels,” with other energy industry leaders, the prince told delegates that Saudi Arabia was a “pioneer” in many areas of clean energy production and usage, and that it had taken big steps toward diversifying its energy mix.

“My job is to promote Saudi Arabia, of course, but on this issue I’m proud to do so, because we are doing it all,” he said, before outlining “clean energy” policies in detail.

“We have developed the idea of the circular carbon economy, and we are pioneers of carbon sequestration at Aramco, as well as measures on upstream and downstream efficiency. We have the lowest carbon cost in production and extraction.

“We have reduced domestic consumption and the energy intensity of our economy by many percentage points. We are converting cars to be more efficient, as well as other gadgets, to be more efficient than any in the world. And we manufacture them too,” he added.

Climate change and environmental concerns have dominated the opening two days of the Davos gathering, with fears expressed by corporate executives as well as environmental activists about what some have called an impending “catastrophe.”

Prince Abdulaziz, at his first Davos as energy minister, said that the Kingdom, as one of the world’s biggest oil producers and exporters, had a duty to play its part in the energy transformation away from fossil fuels, but had other responsibilities as well.

“We are involved in a transformative effort to combat climate change. But we will preserve our liquids (crude oil) because we owe it to the world to export our liquids. We are converting our power sector and its energy mix to a point where by 2030 I am confident we will become one of the top producers of solar energy and renewables.

“I am keen to deliver on this because I have a boss called (Crown) Prince Mohammed bin Salman who is all over me to ensure we become one of the top producers. I can make a pledge and a commitment that by 2030 we will see our entire power sector, with the exception of some remote areas, changing to gas and renewable energy,” he added.

He spoke of the embryonic nuclear industry in the Kingdom, where Saudi policymakers were seeking international partners for the peaceful use of nuclear power. “We’re also getting involved in nuclear, because we want to have all our options open.”

But he also warned about setting unrealistic targets for moving away from fossil fuels, with some environmental campaigners calling for an immediate reduction in fossil-fuel usage to cut carbon emissions and reverse climate-change trends.

“Honestly we have to be realistic. Some people say that in two years from now oil consumption would have to start coming down. Can anybody in this room say with a sensible mind how you come to that reality?” the minister said.

Also on the panel, moderated by Daniel Yergin, the eminent historian of the energy industry, were Maria Fernanda Suarez, energy minister of Columbia, Patrick Pouyanne, chairman and chief executive of French oil company Total, and Wan Zulkiflee Wan Ariffin, president and chief executive of Malaysian energy giant Pertronas.

All were united in their desire to make the global energy community more aware of and effective in dealing with climate change.

Suarez said: “Ending energy emissions is the most important challenge the energy industry can address.” The Colombian government is facing opposition over plans to develop its considerable shale oil reserves.

Colombia is also keen to move toward more gas production in place of oil, which was a transition echoed by Pouyanne and Ariffin, though there were challenges with production of liquefied natural gas against a background of rising supply and falling prices. “I think we will be oversupplied in the period 2024 to 2027 when lots of new gas projects will come on stream, so short term there will be weaker prices, but longer term there could be a step up in prices,” the Malaysian business leader said.

Pouyanne backed the Saudi view on the importance of balancing global energy demands with environmental needs. “The world needs more energy. We have a growing population and people want social and economic development. The challenge is how to produce more energy with less emissions,” he said.

Prince Abdulaziz said that it was important for more developed countries not to tell emerging economies how to conduct their energy affairs.

“This is not about promoting oil, or gas, or renewable, it is about promoting prosperity and sustainability. There is a lot of growth that needs to happen, in terms of wellbeing of the economies of Africa, Asia and elsewhere. These places need to move away from poverty toward a pattern of sustainable development and a level of industrialization. They don’t need to carry the burden of the previous industrialization. It is not fair; it is not equitable.

“I always hated the idea of top-to-bottom approaches. There is this element of condescension but (developed countries) are only attending to their own interests, and it does not address those economies at a different level of development and aspiration,” the prince added.

He said that Saudi Arabia would not be “intimidated” by activists telling it how to manage its energy policy. “We’re cool and calm in Saudi Arabia and attend to our own agenda. I have always to advise people to avoid being manipulated and intimidated.”

On the question of oil prices, he refused to be drawn into making a forecast, but hinted that the “dark, pessimistic time” was lifting after the attacks on Saudi Aramco oil facilities last September.

“Since when have we seen a market where an entire country’s oil production has virtually come to a halt, and we see prices come down? It only happened because when we have Opec+,” he said, in reference to the agreement between oil exporters led by Saudi Arabia and Russia to limit crude output.

He noted that on the supply side, Libyan worries, Middle East tensions and American shale oil output would dominate oil market thinking in 2020.