TADAWUL TO HOST WORLD’S BIGGEST IPO

Saudi Aramco, the world’s largest integrated oil and gas company in terms of production, aims to list a portion of its shares on the Saudi stock market.

The government-owned company said in November that its growth has been underpinned by long-term, exclusive access to the kingdom’s unique hydrocarbon resources, which it manages in order to optimise production and maximise long-term value.

“At the same time, the company seeks to preserve the low-carbon intensity of its crude oil production to demonstrate its ongoing commitment to sustainability,” said Yasir Othman Al-Rumayyan, chairman of the board of directors of Saudi Aramco and governor of the PublicInvestment Fund (PIF).

“The company has a strong track record of creating value for its current shareholder, the government. I look forward to welcoming new shareholders who, I am confident, will benefit from the company’s reliability and continued growth.”

The oil giant said it plans to sell 1.5% of the company, or about 3 billion shares, at an indicative price range of SAR 30 to SAR 32, valuing the IPO at as much as SAR 96 billion (USD 25.6 billion), and giving the company a potential market value of between USD 1.6 trillion and USD 1.7 trillion.

The stock offering on the Tadawul will be made available to all Saudi nationals, GCC nationals and certain foreign nationals resident in Saudi with either a bank account or an investment portfolio with one of the registered banks, according to Aramco.

The sheer breadth and scale of Aramco dwarves the rest of the global energy industry. In a statement, the company said that it had higher operating cash flow, free cash flow, earnings before interest and taxation, and return on average capital employed than each of the five major international oil companies, namely ExxonMobil Corp., Royal Dutch Shell Plc, Chevron Corp, Total ASA, and BP Plc.

“This supports our commitment to sustainable and growing dividends through crude oil price cycles by effectively utilising our free cash flow while maintaining low targeted gearing ratios,” said Amin Nasser, president and chief executive officer of Aramco.

Last year, Aramco’s operating cash flow stood at USD 121 billion, with net income of USD 111.1 billion.

Equally crucial, Aramco’s gearing ratio of 2.4% (total borrowings less cash and cash equivalents) is lower than each of the five major international oil companies.

Altogether, Aramco’s liquids production stood at 11.6 million barrels per day (bpd) last year, including 10.3 million bpd of crude oil, 0.2 million bpd of unblended condensates and 1.1 million bpd of natural gas liquids. The company also produced 8.9 billion standard cubic feet per day of natural gas and 1.0 billion standard cubic feet per day of ethane during the period. Aramco said its total capacity of crude oil stands at 12 million bpd – the largest in the world by any company.

Saudi Aramco is an attractive company given its growth plans, which are based on abundant reserves, technological prowess, financial muscle and a robust strategy.

From 2014 to 2018, it executed 22 projects with capital expenditures of more than SAR 1.9 billion (USD 500 million) each, to position itself for growth.

The company is reinforcing its plans to maintain its position as the world’s leading crude oil producer by production volume and the lowest cost producer, while ensuring reliable, low-carbon intensity crude oil supply to customers.

It is also looking to build on its status as the fourth largest integrated refiner in the world on a net refining capacity basis, supplying high value products to the kingdom and in large and high growth markets worldwide.

To achieve this, Aramco is bolstering its petrochemicals business, with the proposed 70% acquisition of Saudi Arabian Basic Chemicals (SABIC) from sovereign wealth fund PIF.

“Following the closing of the SABIC transaction, the company’s chemicals business will operate in over 50 countries and produce a range of chemicals, including olefins, ethylene, ethylene glycol, ethylene oxide, methanol, MTBE, polyethylene and engineering plastics and their derivatives, among other products,” Aramco said.

Once complete, Aramco expects to have the largest net production capacity for ethylene and be amongst the top four companies by net production capacity for polyethylene, monoethylene glycol and polypropylene.

Another key growth area is gas production to meet rising domestic demand, which is expected to grow annually by 3.6% through to 2030.

The company aims to monetise its 185.7 trillion standard cubic feet of proved natural gas reserves, according to the Aramco prospectus.

Aramco’s other strategic priorities include capturing value from further strategic integration and diversification of its operations; efficiently allocating capital and maintaining a prudent and flexible balance sheet; and operating sustainably by leveraging technology and innovation.

Another major priority is to deliver sustainable and growing dividends through crude oil price cycles. The company’s board intends to declare cash dividends of at least USD 75 billion in 2020, in addition to any potential special dividends.