Japan oil refiner: Country's firms will likely spurn Aramco IPO

Japan oil refiner: Country's firms will likely spurn Aramco IPO

The kingdom's plan to sell part of the company is part of a wider economic overhaul aimed at raising new streams of revenue for the oil-dependent country, particularly as oil prices struggle to reach the $75 to $80 price range per barrel analysts say is needed to balance Saudi Arabia's budget. But bankers working on the deal have said Aramco's valuation is between $1.3 trillion and $1.7 trillion.

Up to 0.5% of shares will be allocated to individual investors in what could be the biggest initial public offering in history.

The oil company said the offering will start next Sunday, November 17, and close on November 28 for individual subscribers and on December 4 for institutional investors.

China, the world's largest oil importer, is expected to commit as much as $10 billion through sovereign wealth funds and other state-owned enterprises.

"Apart from the oil price, of course, the main risks are the degree to which Aramco needs to shoulder the burden of OPEC Plus output restraint, allocation of capital into projects which maximise value for Saudi overall as opposed to Aramco minority shareholders, physical security risks and the dividend payout ratio in the long-term", said Hasnain Malik, head of equity strategy at Tellimer.

Aramco has hired a host of global banking giants including Citibank, Credit Suisse and HSBC as financial advisers to assess interest in the share sale and set a price.

The government will then have a lockup period of a year on further share sales after this initial period.

Additional risks on the company's finances include climate change concerns leading to a reduction of global demand for hydrocarbons, political and social instability in the Middle East and terrorism and armed conflict, according to the document.

"Aramco IPO is an opportunity that shouldn't be missed, the largest company in the world.holding Aramco shares is an absolute gain", a Saudi with a twitter handle named Abdulrahman wrote.

It was initially thought about 5% of Aramco would be sold, but the final figure is now expected to be half that.

Aramco said the timetable was delayed because it began a process to acquire a 70% stake in petrochemicals maker Saudi Basic Industries Corp 2010.SE .

In an online roadshow presentation last week, Aramco said the oil giant is worth $1.5 trillion at an oil price of $45 a barrel; $1.76 trillion at $65; and $2.1 trillion at $75.

Inspite of questions above Aramco's valuation and the way considerably of the company will in the end be on the market on Saudi Arabia's Tadawul stock commerce, the agency's dimension and profitability has manufactured it undeniably interesting to potential merchants.



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