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Expect More Oil And Gas IPOs In The Middle East

Global interest in oil and natural gas related assets is still high, maybe even higher than ever before. In a statement made by Abu Dhabi's national oil company ADNOC, the company stated that it had raised $2.5 billion from the initial public offering of its gas business. Until now, this is the biggest listing of 2023, showing that the Middle East, especially the UAE, Qatar and Saudi Arabia, are in the spotlights of international finance. ADNOC also reiterated that the IPO has been 50X oversubscribed, as more than $124 billion worth of orders by investors have been received for the 5% stake in ADNOC Gas. The national oil company, which is the parent of ADNOC Gas, has priced the shares at 2.37 dirhams ($0.65) each after offering a range from 2.25 to 2.43 dirhams. With this price range, the value of ADNOC Gas is set at around $50 billion, the same value as U.S. oil and gas company Occidental Petroleum.  The main driver behind the extremely high interest in ADNOC Gas is the global energy crunch, a big part of which is the gas market related. The impact of Russia's war in Ukraine, combined with Western sanctions on Moscow, and the debilitating effects of renewables not being able to fill the gap left by Russia in Europe are the main drivers behind the gas crisis. For ADNOC Gas, the gas supply crunch is reflected in its financial figures for FY2021-2022, which show record earnings of $8.7 billion in the 12 months through October. Even at lower prices, global gas demand is expected to be strong, and prices are expected to remain elevated for at least until 2026. ADNOC Gas and others have been investing billions of dollars to keep up with expected demand in the future. The ADNOC Gas shares are expected to start trading on March 13. 

Related: Russia Plans To Mothball Sabotaged Nord Stream Pipelines

The last week, due to the large interest of investors, ADNOC increased its offering size by 25%. High energy prices and a very positive outlook for the next years are expected to generate high cash flow, and new gas-related IPOs can be expected in the region in the next few years.  The ADNOC Gas IPO is the most successful of the Abu Dhabi giant until now. Retail investors put orders in for $23 billion (58X oversubscribed). But the main investors are institutional investors, including Abu Dhabi state-linked firms, which committed to buy $850 million of stock in the IPO, such as Alpha Dhabi and International Holding. Just before the IPO, 5% of ADNOC Gas was transferred to TAQA, the state-owned power company of Abu Dhabi. 

ADNOC Gas will be focusing on reaping the rewards of Abu Dhabi's gas reserves, which are the world's 7th largest, as it targets to triple its LNG exports to 15 million tons per year. 

More IPO-related news can be expected in the next few months as other parties in the region will have been looking at the results and appetite of investors for hydrocarbon-related assets. Without any question, Qatar will be reassessing its options, as the world's largest gas exporter is looking to retain its dominant role. Any additional share sales of its LNG-related companies would be a major boost for the country. North African gas producer Egypt may also consider public offerings. In order to reinvigorate its economy, Cairo could be assessing the option of publicly offering a stake in its fast-growing LNG industry to reap some additional cash without needing to ask Arab producers for a new tranche of financial support. 

The most surprising offering then could come from Aramco. As Saudi Crown Prince Mohammed bin Salman has been playing with the idea to offer more shares to the public, and the success of the ADNOC Gas IPO will not go unseen in Riyadh. A possible sale of another 2.5-5% of Aramco could be a very attractive proposition for the Saudis. The current high valuation of hydrocarbon assets and the need to finance megaprojects such as NEOM and Oxagon could be a great incentive for the decision-makers in Riyadh. 

By Cyril Widdershoven for Oilprice.com

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Cyril Widdershoven

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently he works as a Senior Researcher at Hill Tower Resource Advisors. Next… More