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Saudi Arabia oil company Aramco IPO



Saudi Arabia's state-owned oil giant Aramco is the most profitable company in the world, but it remains unknown.

In its preliminary prospectus, Aramco revealed that it would sell up to 0.5 per cent of individual retail investors. It did not indicate how much it would be revealed later.

Still, the highly-anticipated sale of even more than 2 per cent of the company has been generating global buzz because even a sliver would make this the world's biggest initial public offering.

Saudi Aramco is the kingdom's oil and gas producer, pumping more than 10 million barrels of crude oil a day, or some 10 per cent of global demand.

Despite questions over Aramco's valuation and how much of the company will ultimately be for sale on Saudi Arabia's Tadawul stock exchange, the company's size and profitability has made it undeniably attractive to potential investors.

The oil and gas company last year, more than Apple, Royal Dutch Shell and Exxon Mobile combined.

Trading on Saudi Arabia's domestic exchange could begin as soon as December 11, according to state-linked media. Aramco does not appear in any of the most recent plans.

Participants of the Future Investment Initiative forum where Aramco's partial floating was announced to take a break in the lobby of the Ritz Carlton Hotel in Riyadh, Saudi Arabia.

AMR NABIL / AP

Participants of the Future Investment Initiative forum where Aramco's partial floating was announced to take a break in the lobby of the Ritz Carlton Hotel in Riyadh, Saudi Arabia.

In the roughly 650-page prospectus released on Sunday (NZT), Aramco said the offer was for the period of investors. 5, according to the document.

Aramco is worth. US $ 75b (NZ $ 118b) starting in 2020, but questions linger over how much Aramco is worth.

Crown Prince Mohammed bin Salman is priced at US $ 2 trillion (NZ $ 3.15t), but analysts estimate the value is closer to US $ 1.5t (NZ $ 2.4t).

US $ 75-80 (NZ $ 118-126) price range US $ 75-80 (NZ $ 118-126) price range per barrel analysts Saudi Arabia's budget. Brent crude closed Friday at around US $ 62 (NZ $ 98) a barrel.

WHAT'S THE SALE FOR?

Prince Mohammed has said listing Aramco is one way for the kingdom to raise capital for the country's sovereign wealth fund, which would then use that revenue to develop new cities and lucrative projects across Saudi Arabia.

The Crown Prince has stated that ownership of Aramco will ultimately be moved to the Public Investment Fund, meaning that the Saudi government will remain the largest shareholder.

Aramco's low-cost oil production and its enormous reserves have helped transform the kingdom into one of the world's top 20 economies, but the state's control of the company carries a number of risks for investors.

An attack on two key Aramco processing sites in September, which Saudi Arabia has blamed on its regional foe Iran, highlighted how the company's stability and security is directly linked to that owners – the Saudi government and its ruling family.

An Aramco oil facility in Jubeil, about 600km from Riyadh, Saudi Arabia.

HASSAN AMMAR / AP

An Aramco oil facility in Jubeil, about 600km from Riyadh, Saudi Arabia.

The document lists a number of risks for the prospective investors.

The prospectus noted that the Saudi government ultimately decides the level of crude oil production. The kingdom has slashed Aramco's production when it's sought to boost oil prices.

Additional risks on the basis of the company's finances include climate change concerns and a reduction in global demand for hydrocarbons, and in the Middle East.


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