News Middle East12 Nov 2019

Saudi Arabia:Oil giant Aramco to launch IPO on 17 Nov

12 Nov 2019

Saudi Arabian oil giant Aramco has released a preliminary prospectus for its much awaited initial public offering which is the biggest in the world.

In its preliminary prospectus, state owned Aramco says it will sell up to 0.5% of its shares to individual retail investors. It does not indicate the price range nor how much will be made available to institutional investors.

Aramco says the offer period for investors will begin on 17 November. It closes for individual investors on 28 November and for institutional investors on 4 December. Aramco will price its shares on 5 December.

Prince Mohammed, the crown prince, 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.

Aramco pumps more than 10m barrels of crude oil a day, or some 10% of global demand. The company posted profits of $111bn last year.

Risks

Aramco's preliminary prospectus lists several risks for prospective investors to consider. These include:

  • The Company’s results of operations and cash flow are significantly impacted by international crude oil supply and demand and the price at which it is able to sell crude oil.

  • The Company exports a substantial portion of its crude oil and refined products to customers in Asia, and adverse economic or political developments in Asia could impact the Company’s results of operations.

  • The Company operates in a highly competitive environment. Competitive pressure could have a material adverse impact on the price at which it sells crude oil and other products.

  • Estimates of proved hydrocarbon reserves depend on significant interpretations, assumptions and judgments. Any significant deviation or changes in existing economic and operating conditions could affect the estimated quantity and value of the Company’s proved reserves.

  • The Company is subject to operational risks and hazards that may have a significant impact on its operations or result in significant liabilities and costs.

  • The Company is subject to operational risks common in the oil and gas industry, including:

    • crude oil or gas spills, pipeline leaks and ruptures, storage tank leaks, and accidents involving explosions, fires, blow outs and surface cratering;

    • power shortages or failures;

    • mechanical or equipment failures;

    • transportation interruptions and accidents;

    • tropical monsoons, storms, floods and other natural disasters; and

    • chemical spills, discharges or releases of toxic or hazardous substances or gases.

  • The Company could be subject to losses from risks related to insufficient insurance. The Company insures against risk primarily by self-insuring through its captive insurance subsidiary, Stellar, which provides insurance exclusively to the Company. The Company also obtains insurance in certain areas from third party providers in excess of the coverage provided through Stellar.

  • Increased concerns regarding the safe use of chemicals and plastics and their potential impact on the environment have resulted in more restrictive regulations and could lead to new regulations.

  • The Company’s management team has limited experience managing a public company.

  • The Company’s operations are dependent on the reliability and security of its IT systems.

  • 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.

  • Political and social instability and unrest and actual or potential armed conflicts in the MENA region and other areas may affect the Company’s results of operations and financial position.

  • Terrorism and armed conflict may materially and adversely affect the Company and the market price of the shares.


 

 

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