Saudi Arabia is pulling out all the stops to ensure the success of Aramco’s initial public offering after Crown Prince Mohammed bin Salman finally decided to offer shares in the world’s largest oil producer.
The kingdom cut taxes on the company for a third time, revealed incentives for investors not to sell and is considering boosting dividends further. Yet the Saudi government has already conceded the company probably isn’t worth the $2 trillion valuation Prince Mohammed has long advocated.More than three years after the IPO was first mooted, Aramco published a so-called intention to float on Sunday, the most dramatic change to the Saudi oil industry since the company was nationalized in the 1970s. The IPO is a cornerstone of Prince Mohammed’s Vision 2030 plan to make the Saudi economy ready for the post-oil era.
Saudi Arabia is aiming for a valuation of between $1.6 trillion and $1.8 trillion, according to people familiar with the matter. Analysts at banks working on the deal offered wildly diverging estimates: Goldman Sachs Group Inc. told investors Aramco is worth between $1.6 trillion and $2.3 trillion. Bank of America, another top bank on the deal, had the bottom of its range at just $1.2 trillion. BNP gave an estimate of $1.42 trillion.“This is the right time for us,” Chairman Yasir Al-Rumayyan said at a news conference at Aramco’s headquarters in the eastern city of Dhahran on Sunday.
Aramco’s net income last year of $111 billion made it the most profitable of any corporation -- more than Apple Inc., Google’s parent Alphabet Inc. and Exxon Mobil Corp. combined -- but the company has pledged to pay a minimum of $75 billion in dividends, leaving it vulnerable to a downturn in oil prices.Most of the banks valuations are based on oil prices staying above $60 a barrel and assume Aramco will be able to raise oil production by 2021. Almost every bank assumes Aramco will need to take debt this year and next year to cover spending and dividend payments. JPMorgan Chase & Co. published a 118-page report without offering a valuation, but called Aramco the first “mega-major” oil company....READ MORE
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