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Aramco Valuation Still Under Scrutiny

The Saudi Crown Prince Mohammed Bin Salman is still holding fast to the notion that Saudi Arabia’s crown jewel, Saudi Aramco, is valued at $2 trillion, while analysts remain skeptical that the world’s largest oil company is truly worth $2 trillion, according to a Reuters exclusive.

The valuation of the Saudi oil giant is a critical factor of The Kingdom’s plan to take 5 percent of Aramco public in an effort to raise cash for investments in anything but oil.

According to Reuters sources, an Aramco board meeting will take place later this week to discuss the valuation, which some analysts peg closer to $1.5 trillion. The $500 billion difference between MbS’s valuation and analysts’ valuation is no small matter, and is just one more item in a long list of speed bumps for Aramco on the road to its IPO.

It is likely that the valuation will continue to be a sticking point for the listing, with the Saudi’s not seemingly in any particular hurry to rush the listing, with years of delays so far.

The new timeline for the Aramco IPO, after numerous delays, is now set for 2020 or 2021, but doubts in that date remain despite the market’s healthy interest in the listing. As oil prices continue to fall as the US/China trade war snowballs into a currency war, the valuation is looking even less realistic.

And for as long as oil prices remain pressured by the trade war, MbS is unlikely to move forward with the project with any urgency. But one source who spoke to Reuters said that Aramco was looking to boost its value through means other than oil price. This other means would have to do with internal governance and how it integrates its recently acquired SABIC into Aramco.

This would be a whole lot of “other means” to make up for $500 billion.

By Julianne Geiger for Oilprice.com

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