The Strategist

Saudi Arabia Is Mulling Over Aramco's IPO

01/08/2016 - 12:42

Saudi Arabia is considering possibility of an initial public offering of the state oil company Saudi Arabian Oil Co. (Aramco). The decision may be taken in the coming months.

Crown Prince Mohammed bin Salman aired the possible sale of a stake in Aramco in an interview with Britain's The Economist.

Currently, Aramco controls more than 10% of the world oil market’s production.

It is not known exactly what stake is in the question, but if the placement is carried out, the Saudi company could enter the top three largest public companies in the world, and even claim the first place, which is now occupied by Apple.

Saudi Arabian Oil Co. is the only company producing oil in Saudi Arabia. According to recent reports, it owns second largest oil reserves in the world. The market value of stocks (261 billion barrels) is $ 319 billion. Size of Aramco’s reserves 10 times overtakes the oil giant Exxon Mobil.

According to preliminary conservative estimates, the company's value may exceed $ 2.5 trillion. However, the current global market is extremely disadvantageous to hold IPO, and it is unlikely that the situation will change in the coming months.

The Saudis’ premises are unclear for now, yet thoughts about selling shares in Aramco are obviously linked to the kingdom’s negative financial outlook. Foreign exchange reserves continue to disappear at an alarming rate, and oil prices are is still extremely low.

Of course, Aramco could become one of the most influential public companies in the global economy, but potential investors have yet to be convinced of the attractiveness and prospects, which is not easy to do now.

Bin Salman himself compares Aramco’s possible IPO with the economic reforms held by Margaret Thatcher.