Aramco says it is ready for two-stage IPO

ABU DHABI — Saudi Arabia’ energy company Aramco is ready for a two-stage stock market debut including an international listing "very soon" but the timing is up to the government, its CEO said on Tuesday.

Aramco has said it plans to float around 5 per cent of the state-owned company in 2020 or 2021 in what could potentially be the world's biggest stock sale.

The mammoth Initial Public Offering (IPO) forms the cornerstone of a reform programme envisaged by the kingdom's de facto ruler Crown Prince Mohammed Bin Salman to wean the Saudi economy off its reliance on oil.

It aims to raise up to $100 billion based on a $2 trillion valuation of the company, but investors have debated whether Aramco is worth that much and there have been repeated delays in the launch originally envisaged for 2018.

"We have always said is that Aramco is ready for listing whenever the shareholders make a decision to list," Aramco CEO Amin Nasser told reporters on the sidelines of the World Energy Congress. 

"And as you hear from His Royal Highness Prince Abdulaziz yesterday, it is going to be very soon. So we are ready — that is the bottom line," he said, referring to the newly appointed energy minister.

With the low oil price believed to be a factor weighing on their decision-making, he added however that the actual date would be a "government decision".

The government has not given any explanation for the delays, but apart from holding out for the big-ticket valuation they are also said to be concerned the IPO could bring intense legal scrutiny of the secretive company's finances and corporate inner workings.

Tokyo option 

The Wall Street Journal reported last week that Aramco was considering a two-stage process with a domestic debut and a subsequent international listing — possibly in Tokyo. 

"One of the primary listings is going to be local but we are also ready for listing outside," Nasser confirmed.

A Tokyo listing would be a setback for London, New York and Hong Kong, which have all vied for a slice of the business. 

Political uncertainty in Britain over its plan to exit the European Union and mass protests in Hong Kong have diminished their prospects, the Journal cited Saudi officials as saying.

Prince Abdulaziz Bin Salman was promoted on Sunday to the pivotal role of energy minister, replacing veteran official Khalid Al Falih, as the top crude exporter accelerates preparations for the much-anticipated IPO.

The appointment of Prince Abdulaziz, one of the sons of Saudi Arabia's King Salman, marks the first time a royal family member has been put in charge of the all-important ministry.

In his first comments since taking up the role, the minister on Monday endorsed oil supply cuts, saying in Abu Dhabi that they would benefit all producing nations amid an oversupplied market and sagging prices. 

Crude prices are currently moving around levels of $60 a barrel, compared with more than $75 a year ago, but were given a boost on Monday by the comments.

 Prices in decline 

The OPEC petroleum exporters' cartel and key independent producers are deliberating how to halt a slide in prices that has persisted despite previous cuts and US sanctions that have squeezed supply from Iran and Venezuela.

Abu Dhabi is also hosting this week a meeting of the Joint Ministerial Monitoring Committee of the OPEC+ alliance for a supply cut deal reached last year.

The ministers will consider fresh reductions, even though analysts are doubtful such a move would succeed in bolstering crude prices which have been badly dented by the US-China trade war.

The Aramco listing is key to Saudi's economic future. Its GDP grew by 2.4 per cent last year but the International Monetary Fund (IMF) said growth would fall to 1.9 per cent in 2019 due to substantial oil output cuts.

The IMF said that fiscal reforms, including a consumption tax and higher energy prices, have started to yield results but that more is needed to plug a chronic budget deficit.

The prospect of falling short of the $2 trillion valuation desired by Saudi rulers is widely considered the reason the IPO — previously scheduled for 2018 — has been delayed.

Earlier this month, Aramco said its first half net income for 2019 slipped nearly 12 per cent to $46.9 billion on lower crude prices.

It was the first time the company has published half-year financial results and comes after Aramco opened its secretive accounts for the first time in April, revealing itself to be the world's most profitable company.