The initial public offering of Saudi Aramco—currently slated for the second half of 2018—could be pushed into 2019, Saudi Energy Minister Khalid Al-Falih hinted in an interview with Bloomberg published on Thursday—the first such hint from a high-ranking Saudi official that the highly anticipated listing of Saudi Arabia’s oil giant may not see the light of day this year as promised.
“Between December 31st and January 1st there is no value lost for the kingdom,” al-Falih told Bloomberg in London. “So, I don’t see this artificial deadline that you refer to as being significant,” OPEC’s most influential minister said.
“The only certain thing about the Saudi Aramco IPO is that a) it will happen, b) the anchor market will be the Tadawul exchange in Saudi Arabia,” al-Falih told Bloomberg.
For months now, various analysts have been wondering whether Saudi Arabia will manage to pull off the listing of 5 percent of Aramco this year, amid speculation as to which foreign stock market the Saudis will choose, if any, and if the price of oil would be high enough to support a high valuation for the company.
The planned sale of 5 percent of Aramco—in what would likely be the world’s largest IPO ever—could bring Saudi Arabia US$100 billion if Saudi officials’ valuation of the company at US$2 trillion stands. Analysts value the Kingdom’s oil giant at much less, with the majority putting the valuation at between US$1 trillion and US$1.5 trillion. Related: Can Tech Really Transform The Oil Industry?
Aramco has made all necessary preparations for the IPO, al-Falih told Bloomberg today.
“We have created the framework -- fiscal and otherwise regulatory -- for Saudi Aramco to be listed this year. The actual timing will be announced when we feel that the conditions for the success of that listing are in place,” he noted.
In January this year, Aramco’s CEO Amin Nasser told CNBC that the company would be ready for listing by the second half of this year, but it is awaiting a green light by its sole shareholder, the Saudi government.
Meanwhile, reports suggested earlier this week that Hong Kong is emerging as the frontrunner for Aramco’s international listing, just as Saudi Crown Prince Mohammed bin Salman is embarking on UK and U.S. visits that could decide if London and/or New York, the early favorites for the international venue, will continue to be in the race.
By Tsvetana Paraskova for Oilprice.com
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My opinion is based on the following factors: first, listing Saudi Aramco on the Saudi stock market, Tadawul, will overwhelm it creating liquidity concerns; second, Saudi Arabia is no longer financially in need of the IPO; third Saudi valuation of the IPO is far bigger than Wall Street’s and other financial companies’ valuations; and fourth, there are many economic and geopolitical issues involved with the IPO not least among them risk of litigation by the United States..
The recent rise in oil prices is already starting to repair the damage inflicted on the Saudi economy by the oil price crash in 2014. So financially, Saudi Arabia has no need for the IPO.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Also, anyone else (beside myself) see this coming a long time ago?
This means that at the next OPEC meeting you better believe that the production cuts will be extended...yet again. They will say it's because WTI is still not at least $70/bbl, despite the Saudis saying in early 2016 that they are the only producers that can turn a profit on oil at $10/bbl.
So, inevitably, the price of oil will likely go up much higher than it is today, and when the news of this occurs, that price increase will happen rather quickly due to algorithmic trading on behalf of U.S. hedge fund managers.