Mohammed bin Salman, Saudi Arabia’s Crown Prince, has made the Saudi Aramco IPO a cornerstone of the kingdom’s economic reform to 2030. He is looking to raise $100 billion by selling a 5 per cent stake in Aramco. AP photo by Cliff Owen.
Saudi Aramco IPO likely late this year or next year
Despite Saudi Aramco being the world’s most profitable oil company, its earnings and cash flows could not be enough to justify its desired $2 trillion valuation, according to a report by Bloomberg.
For years, Aramco has kept its financial performance secret, but with the company preparing to offer 5 per cent in a long-awaited initial public offering (IPO), it needs to show investors how much it earns and how it operates.
Bloomberg reports the Saudi national oil and gas company had a net income of $33.8 billion in the first six months of 2017 and cash flows of $52.18 billion.
Aramco disagrees. “This is inaccurate, Saudi Aramco does not comment on speculation regarding its financial performance and fiscal regime.”
These accounts, prepared to the IFRS standard, showed the company made $7.2 billion in net income during the first half of 2016 when oil prices averaged $41/barrel, according to Bloomberg.
The Aramco IPO has been made an important piece of the kingdom’s economic reform to 2030. Crown Prince Mohammed bin Salman has been pushing the IPO and is looking to raise $100 billion in the sale on local and foreign exchanges.
Should Aramco raise $100 billion, that would give the company a market capitalization of $2 trillion. This would be the largest achieved by any company and would eclipse its competitors, including Exxon Mobil and Royal Dutch Shell.
Exxon and Shell both reported a net income of $7.4 billion in the first half of 2017. According to Reuters, Exxon’s current market capitalization is $327 billion and Shell’s sits at $285 billion.
Investors may look at Aramco’s desired market value at six to seven times higher than Exxon and Shell as being too ambitious. A number of investors and analysts have argued that Saudi Aramco could be valued at over $1 trillion.