Saudi Aramco shares soar at maximum 10% on market debut

Aramco’s indicative debut price is seen at 35.2 riyals, 10 per cent above IPO price. (AFP)
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Updated 12 December 2019

Saudi Aramco shares soar at maximum 10% on market debut

  • Despite an unfavorable global market mood, the much-anticipated IPO has enjoyed the best possible start for investors
  • Company is now world’s largest publicly traded company, bigger than Apple

RIYADH: Saudi Aramco shares surged to the maximum allowed 10 percent above their listing price on their debut in Riyadh on Wednesday.


The stock jumped to SR35.2 ($9.39), up from the initial public offering (IPO) price of SR32 ($8.53), hitting the daily limit permitted by the Tadawul stock exchange and giving the company a valuation of about $1.88 trillion. 

At that price, Aramco is world’s most valuable listed company. That’s more than the top five oil companies – Exxon Mobil, Total, Royal Dutch Shell, Chevron and BP – combined.

The Aramco IPO also surpassed the $25 billion raised by Chinese retail giant Alibaba in its 2014 Wall Street debut. 

HIGHLIGHTS

  • Shares up by the maximum daily limit
  • Valuation approaches $2 trillion goal
  • Tadawul propelled into global top ten

The listing debut was marked by a symbolic ringing of the Tadawul bell by Aramco Chairman Yasir Al-Rumayyan and Chief Executive Amin Nasser.

“This is a proud and historic mo- ment for Saudi Aramco and our majority shareholder, the Kingdom,” Al-Rumayyan said. The focus of company chiefs was “to work in the interests of all shareholders, guiding Saudi Aramco as it continues to fulfill its vital role in global energy supply, while striving to create long-term value to benefit all shareholders,” he said.

“Today’s milestone underlines the Kingdom’s commitment to nur- turing a strong capital market and demonstrates further significant progress in delivering Vision 2030 — the Kingdom’s transformation, economic growth and diversifica- tion program that continues with pace and determination.”

“Today Aramco will become the largest listed company in the world and (Tadawul) among the top ten global financial markets,” Sarah Al-Suhaimi, chairwoman of the Saudi Arabian stock exchange, said during a ceremony marking the oil giant’s first day of trading.

Amin Nasser, the president and CEO of Saudi Aramco, meanwhile thanked the new shareholders for their confidence and trust of the oil company.

The sale of 1.5 percent of the firm, or three billion shares, is the bedrock of Crown Prince Mohammed bin Salman’s ambitious strategy to overhaul the oil-reliant economy.


Prince Abdulaziz bin Salman, the Kingdom's energy minister, said last week that investors who didn’t buy into the offering would be “chewing their thumbs” after missing out.

But for the 5 million people who did buy shares in the world’s biggest IPO, it was the best possible start for their investments.

With the ring of a bell, the Tadawul was catapulted into the top ten exchanges in the world by market value, marking another key milestone for a bourse that is rapidly gaining in global financial visibility following its inclusion in the MSCI Emerging Markets and FTSE Russell indexes last year.

“The level of demand for Saudi Aramco was high at almost 5 times oversubscribed, highlighting the local appeal for a quality asset and its attractive dividend policy, even if foreign participation was more muted,” said Bassel Khatoun, a managing director, at Franklin Templeton Emerging Markets Equity. “We believe Aramco’s Tadawul listing will provide further impetus for Saudi’s privatization drive.”

The share sale took place at a turbulent time for the global oil industry, increasingly under the spotlight because of its greenhouse gas emissions. At the same time, a global supply glut caused in part by the growth of the US shale oil sector has dampened investor sentiment towards the sector. Plans for the share sale faced a further shock in September when Saudi Aramco’s main oil processing facility in Abqaiq was hit in a drone attack.

Despite the unfavorable global market mood, the Saudi government pressed ahead with the sale that has long been a cornerstone of the Kingdom’s efforts to modernize its economy and develop its financial sector.

It is expected to be followed by more privatizations as Saudi Arabia seeks to curb its
budget deficit.

Announcing the Saudi budget earlier in the week, Finance Minister Mohammed Al-Jadaan said that the proceeds from the Aramco IPO would be reinvested, helping to create more revenue channels for the government.

Within just one hour of Aramco chairman Yasir Al-Rumayyan ringing the trading bell,
some 766.8 million shares had changed hands.

“Today’s milestone underlines the Kingdom’s commitment to nurturing a strong capital market and demonstrates further significant progress in delivering Vision 2030,” he said.

Millions of Saudis bought into the IPO and yesterday cheered the performance of their shares.
“Buying Aramco shares was a trustworthy opportunity for a small investor like me,” said Alanoud Issa, a 27-year-old housewife from Riyadh. “It is a small beginning which I am hopeful will result in a good dividend for me in the future.”

Such citizen investors formed a major chunk of the subscribers to the IPO, buying some SR49.2 billion worth of shares, many of them making their purchases from ATM machines across the Kingdom. 

Institutional investors, mainly from the region, bought SR397 billion of the stock.

 

 

Watch the video marking Aramco’s opening trading:


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.