Saudi Aramco’s IPO, the world’s largest ever, is ‘on track’ for 2018, CEO Amin Nasser says
Saudi Aramco’s plan to take a portion of its business public next year remains on track, the oil giant’s chief executive Amin Nasser told CNBC in an exclusive interview Sunday. Nasser made his comments following recent reports that the initial public offering for the world’s largest energy company could be delayed into 2019 or shelved in favor of selling private shares to sovereign wealth funds. Saudi Aramco has tried to swat down those rumors, and Nasser denied the reports again in an interview with “Squawk Box”s co-host Andrew Ross Sorkin in the command center at Saudi Aramco headquarters in Dhahran.
“We have always said that we will be listing in 2018, and to be more specific, in the second half of 2018,” he said. “However, I think journalists and writers — they are expecting more and more information, and we are governed by, you know, certain rules with regard to talking about the IPO and all of that.”
“The IPO is on track. The listing venue will be discussed and shared in due course,” Nasser added.
Saudi Aramco, the world’s largest oil company, plans to list its shares on the domestic stock market, the Tadawul, and one or more foreign exchanges. However, it has yet to choose the overseas market, fueling speculation about the kingdom’s plans. The Financial Times reported last month that China was emerging as a front-runner in the possible plan to delay the IPO and sell shares to sovereign wealth funds.
Asked directly about the report, Nasser denied it. “Saudi Aramco are not talking, as I said, to the Chinese or others,” he said. “All of that analysis is being reviewed in detail … to make a decision at a certain stage, and we’re not going to be pushed, you know, by a journalist saying this needs to be talked about or not.”
The IPO for roughly 5% of the company is widely expected to be the largest in history. Saudi officials have said Aramco could attract a $2 trillion valuation, though others forecast the offering will value the company at $1 trillion to $1.5 trillion. In any case, investment banks tapped to handle the transaction stand to reap a huge windfall.
The share sale is also critical to Saudi Arabia’s economic future. The kingdom aims to raise about $100 billion to underwrite Crown Prince Mohammed bin Salman’s efforts to diversify the nation’s economy through a plan called “Vision 2030.”
Nasser believes Saudi Aramco is at the heart of that plan and the kingdom’s transformation. He said the IPO will facilitate key initiatives to grow private business’s share of the economy, create more small- and medium-sized enterprises, boost industrialization and employment and encourage women to join the workforce.
Addressing investor concerns
Some fund managers recently told CNBC their concerns about the IPO include minority shareholder rights, the transparency of oil reserves, the viability of fossil fuels and how the Saudis will balance national priorities and their duty to shareholders. Saudi oil revenues have historically funded its social spending, a critical aspect of its pact to provide for its citizens and its large royal family. That pact is seen as the key to maintaining relative stability in a region rocked by social upheaval in recent years.
Nasser predicted on Sunday it will be easy to convey to investors how Saudi Aramco’s focus on long-term planning has allowed the company to drive past results. He believes the interests of its sole current shareholder — the government — and its future investors are aligned. “I think both are looking for results,” he said. “Both are going to be looking for a better performance, and I don’t see any issues between our current shareholder and the public that will be participating when we are listed because ultimately we need to deliver better results.”
Nasser also addressed the issue of transparency. Some investors have questioned Saudi oil reserves, which have remained roughly constant at about 260 billion to 265 billion barrels since 1989. Saudi Aramco has kept up a robust exploration program, even through the three-year oil price downturn, allowing it to add to its reserves, according to Nasser. He promised that Saudi Aramco will “meet all the requirements of that market in terms of reserve assessment” and other rules of the country where it chooses to list.
Ultimately, Saudi Arabia is largely operating in line with its closest peers, the integrated international oil companies like ExxonMobil and BP, Nasser claimed. “I can say Aramco has always been run like a publicly traded company,” he said. “If you look at our governance, we have independent board members. Everything that has been done in the company is similar to any international oil company in terms of the way we do business.”