SAUDI Aramco today announced its long-awaited stock market debut in what could be the world’s biggest initial public offering (IPO), underpinning Crown Prince Mohammed bin Salman’s ambitions to overhaul the kingdom’s oil-reliant economy.

After years of delay, Aramco said it plans to sell an unspecified number of shares on the Riyadh stock exchange, calling it a “historic” milestone for the energy giant that pumps 10% of the world’s oil.

However, the state firm said there are no current plans for an international listing, indicating that the long-discussed goal for a two-stage IPO, including an offering on a foreign bourse, has been put aside.

The market launch of the world’s most profitable company forms the lynchpin of Prince Mohammed’s ambitious plans to overhaul the oil-reliant economy, with tens of billions of dollars needed to fund mega projects and new industries.

With analysts saying Aramco could be valued at up to US$1.7 trillion (RM7 trillion), the IPO is potentially the world’s biggest, depending on how much of the company it decides to sell.

“Today marks a significant milestone in the history of the company, and important progress towards delivering Saudi Vision 2030, the kingdom’s blueprint for sustained economic diversification and growth,” said Aramco chairman Yasir al-Rumayyan.

“Since its formation, Aramco has become critical to global energy supply.”

The final offer price and the number of shares to be sold “will be determined at the end of the book-building period”, said the firm, which is headquartered in the eastern city of Dhahran.

Aramco had initially been expected to sell a total of 5% on two exchanges, with a first listing of 2% on the Tadawul Saudi bourse followed by a 3% listing on an overseas exchange.

But amid reports that it is struggling to get big institutional investors on board, Rumayyan indicated that the highly anticipated plans for the second stage have been put aside.

“For the (international) listing part, we will let you know in due course. So far, it’s only on Tadawul,” he told a press conference.

However, the company said, the Riyadh offering is open to institutional investors as well as Saudi individuals, foreign residents in the kingdom and other Gulf citizens.

Aramco also released its results for the first nine months of the year, saying net profits came in at US$68 billion. It began releasing interim financial results only recently.

Last year, its net profit of US$111.1 billion was higher than the profits of Apple, Google and Exxon Mobil combined.

The listing was first suggested by Prince Mohammed, the kingdom’s de facto ruler, in 2016. The IPO was delayed several times reportedly due to his dissatisfaction with the valuation of the firm, which fell short of the hoped-for US$2 trillion.

Last week, Energy Intelligence cited sources as saying they expect the Saudis to settle on a valuation of US$1.6 trillion to US$1.7 trillion.

If confirmed, it would imply that Saudi Arabia is ready to accept a compromise of less than the US$2 trillion that Prince Mohammed has long insisted the state oil giant is worth.

It remains to be seen whether Saudi authorities are able to find “a compromise between the crown prince’s stated preference and market realities in their valuation of Aramco”, Kristian Ulrichsen, a fellow at Rice University’s Baker Institute in the US, told AFP.

“As the process has been delayed repeatedly and built up as such an integral component of the crown prince’s plan to transform Saudi Arabia, international investors will pay very close attention to how Aramco performs on the domestic exchange.” – AFP, November 3, 2019.