Nov 9, 2019

New Aramco IPO prospectus touts strengths amid investor questions

Oil tanks at an oil processing facility of Saudi Aramco. Photo: Stanislav Krasilnikov / Contributor/Getty Images

Saudi Aramco on Saturday published the prospectus for its plans to float a small slice of the world's largest oil-producing company on the kingdom's domestic exchange.

Why it matters: This brings Aramco closer to the long-planned, long-delayed public debut, which could be the largest IPO ever. Crown Prince Mohammed bin Salman envisions raising tens of billions of dollars to fund Saudi's economic diversification efforts.

What's next: The prospectus will begin a bidding period for investors on Nov. 17, and announcement of the final price is scheduled for Dec. 5.

  • Trading is expected to begin in mid-December, per The New York Times.
  • Individual investors will be allocated up to 0.5% of the shares, the prospectus states.

What we don’t know: The 658-page document does not say what the offer price will be, how much of the company will be floated or list an estimated valuation.

  • Bin Salman previously hoped for a valuation of $2 trillion, but bank and analyst estimates have been lower, often substantially so.
  • Kingdom officials have planned to list as much as 5% of the company in a two-tiered process, with the IPO on the domestic exchange first, followed by a listing on a larger, as-yet-unnamed international venue. However, the status of the second step is unclear.

The big picture: The mammoth oil producer reported $111 billion in net income last year and holds massive reserves. It provides roughly 10% of the world's crude oil supply.

  • There are, nonetheless, questions about its appeal to investors. The company faces security risks laid bare in aerial attacks it suffered in September.
  • In addition, the company is controlled by the Saudi government, which will remain its dominant shareholder.
  • Weeks ago, Aramco pledged a $75 billion dividend from 2020 through 2024, and, in a move aimed at reassuring potential investors, said outside shareholders are "intended" to be prioritized if they fall below that amount.

The intrigue: The prospectus touts a suite of "competitive strengths," such as "Unrivalled scale of crude oil and condensate production and conventional proved reserves" and low per-barrel production costs.

Overall, Aramco sees Saudi crude, condensate and natural gas liquid supplies growing through at least 2050.

  • It also says growth for oil demand in Asia and other developing nations is expected to offset the effects of alternative energy and new technology like electric vehicles.
  • The prospectus cites a forecast by IHS Markit, the industry consultant on the document, that global demand is slated to grow through roughly 2035 before leveling off, and "an expected increase in market share from lowest cost producers, including the Kingdom."
  • It says that in a scenario where a more rapid transition away from fossil fuels causes demand to peak in the late 2020s, the kingdom's output would still rise through mid-century.

But, but, but: A section of risk disclosures acknowledges: "Climate change concerns and impacts could reduce global demand for hydrocarbons and hydrocarbon-based products and could cause the Company to incur costs or invest additional capital."

  • It also notes the company may be affected by "Political and social instability and unrest," armed conflict and terrorism.

Go deeper:

Editor's note: This piece has been updated to clarify that the prospectus' projection about global oil demand was citing a forecast by IHS Markit.

Go deeper

The wreckage of summer

Illustration: Sarah Grillo/Axios

We usually think of Memorial Day as the start of the summer, with all of the fun and relaxation that goes with it — but this one is just going to remind us of all of the plans that have been ruined by the coronavirus.

Why it matters: If you thought it was stressful to be locked down during the spring, just wait until everyone realizes that all the traditional summer activities we've been looking forward to are largely off-limits this year.

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 8 a.m. ET: 5,428,605 — Total deaths: 345,375 — Total recoveries — 2,179,408Map.
  2. U.S.: Total confirmed cases as of 8 a.m. ET: 1,643,499 — Total deaths: 97,722 — Total recoveries: 366,736 — Total tested: 14,163,915Map.
  3. World: White House announces travel restrictions on Brazil Over 100 cases in Germany tied to single day of church services.
  4. Public health: Officials are urging Americans to wear masks over Memorial Day.
  5. Economy: White House economic adviser Kevin Hassett says it's possible the unemployment rate could still be in double digits by November's election.
  6. Federal government: Trump attacks a Columbia University study that suggests earlier lockdown could have saved 36,000 American lives.
  7. What should I do? Hydroxychloroquine questions answeredTraveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

Updated 5 hours ago - Politics & Policy

U.S. coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios. This graphic includes "probable deaths" that New York City began reporting on April 14.

The CDC is warning of potentially "aggressive rodent behavior" amid a rise in reports of rat activity in several areas, as the animals search further for food while Americans stay home more during the coronavirus pandemic.

By the numbers: More than 97,700 people have died from COVID-19 and over 1.6 million have tested positive in the U.S. Over 366,700 Americans have recovered and more than 14.1 million tests have been conducted.