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ADNOC Distribution IPO Valuation Could Be Lesson For Aramco

Abu Dhabi

The Abu Dhabi National Oil Company (ADNOC) has set an IPO offer price for its fuel distribution unit at US$ 8.5 billion, well below the up-to-US$14 billion valuation the UAE’s state oil firm was targeting six months ago.  

The difference between the expected valuation of ADNOC Distribution in July, and the US$8.5-billion market capitalization at its listing that will take place on December 13, highlights the difference in valuations between Middle Eastern governments and investors, and could serve as a lesson for Saudi Arabia’s planned listing of 5 percent of Saudi Aramco, according to Bloomberg’s Javier Blas.

Initially, ADNOC was thinking of selling between 10 percent and 20 percent of ADNOC Distribution. On Friday, ADNOC said that the number of shares included in the IPO represent 10 percent of ADNOC Distribution’s share capital.

ADNOC Distribution will be the largest IPO on the Abu Dhabi Securities Exchange in over a decade, Sultan Ahmed Al Jaber, ADNOC Group CEO, said in the announcement of the IPO offer price, adding that “ADNOC Distribution will continue to receive the full support and commitment of the ADNOC Group as it begins the next phase of its growth and transformation.”

ADNOC Distribution is nothing like Saudi Aramco, but the valuation of the UAE oil firm’s fuel station network may offer some thoughts to the Saudis, according to Bloomberg.

Saudi officials have claimed that Aramco may be worth US$2 trillion, but analysts value Saudi Arabia’s oil giant at much less.

Related: The GOP Tax Bill Is A Big Win For U.S. Oil And Gas

Earlier this year, most fund managers were evaluating Aramco at below US$1.5 trillion. That was just before Saudi Arabia cut the tax rate on Aramco to 50 percent from 85 percent, which caused some analysts, including Rystad Energy, to raise their valuation of the Saudi company’s upstream portfolio.

Sanford C. Bernstein & Co values Aramco between US$1 trillion and US$1.5 trillion, while Tudor Pickering Holt & Co says the valuation is around US$1.1 trillion, according to Bloomberg.

By Tsvetana Paraskova for Oilprice.com

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