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French Total Considers Stake In Aramco IPO

Crude

Taking part in the much-anticipated IPO of Saudi Aramco is not off the table for oil major Total SA because it could be a good investment, the French group’s chief executive said on Thursday, but noted that any study of a possible participation is premature before more details on the Saudi plans become available.

“We may consider it,” Total’s CEO Patrick Pouyanne said, referring to the Aramco IPO, at an oil industry conference in Paris, as quoted by Reuters.

“I’m sure that it would be a good investment...because Saudi Aramco has a real business case,” the manager of the French group went on to add.

Saudi Arabia plans to list up to 5 percent of its crown jewel next year, on one or more international markets. The deputy crown prince, Mohammad bin Salman Al Saud, has said that Aramco’s value could be $2 trillion, which means that 5 percent would fetch $100 billion for the Kingdom.

But since the staggering $2-trillion valuation was first aired, institutional investors, fund managers, and industry professionals have been trying to find valuation metrics that add up to this figure. Most of the attempts at estimates are largely based on assumptions and speculation regarding how much oil reserves Saudi Arabia really has, which Aramco businesses would be included in the listed entity, how much income taxes and revenue royalties the company would pay to Saudi Arabia, and where oil prices would go a year from now.

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Analysts are mostly valuing Aramco at below $1.5 trillion, although Saudi Arabia slashed the tax rate on Aramco to 50 percent from 85 percent in a bid to attract international investors and raise the company’s value.

Most recently, a Wall Street Journal report suggested that officials at Aramco are applying internal value estimates of $1.3 to $1.5 trillion to the valuation, calling deputy crown prince’s estimate “unrealistic and mind blowing.”

By Tsvetana Paraskova for Oilprice.com

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  • Bonaventure Stephen Gomes on April 27 2017 said:
    It is in the strategic interests of big International Oil Companies (IOCs) to invest in Saudi Aramco's forthcoming IPO, in gesture of goodwill for future and ongoing stakes in their upstream, and downstream ventures. IOCs, and National Oil Companies (NOCs) will be slowly ticking the box, "Add to Cart," keeping open their final options to place the order.

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