Aramco On The Hunt For IPO Advisers

Saudi Aramco has sent requests for proposals to several investment banks that could become advisers in its initial public offering, scheduled for 2018, sources close to the development told Bloomberg. The list of potential candidates includes both big international joints and small banks.

Plans announced by Deputy Crown Prince Mohammed bin Salman last year involve a sale of less than 5 percent of the state oil company, which should fetch around US$100 billion, according to government estimates. Saudi Arabia is grappling with a substantial budget deficit brought on by the oil price crash from 2014.

However, at the time, some observers suggested that Aramco may be unable to deliver such proceeds from its listing, mostly because of investor doubts about the actual state of its affairs, it being a state-run company not obliged to make regular reports on its financial state, which makes it one of the most non-transparent players on the world oil scene.

Another reason for the uncertainty was that there were few buyers in oil and gas capable of affording the acquisition of a meaningful stake in Aramco and accepting the risk associated with such an acquisition. Since then, oil prices have improved and appetite for acquisitions among large investors has recovered, increasing the likelihood that Aramco will find a suitor.

Aware of investor doubts, Saudi officials have promised that the company’s IPO will be “the most transparent national oil company listing of all time,” as Oil Minister Khalid al-Falih said last November. The transparency will include announcing the state of reserves of the company, which, according to Saudi officials, are 260 billion barrels. This information has not yet been verified.

Bloomberg notes that Aramco already has two advisers on board for the listing, JPMorgan, and Michael Klein, a former Citigroup investment banker.

By Irina Slav for Oilprice.com

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