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Long-awaited listing of oil giant Aramco announced

By Philip Smith

Lower valuation of Saudi oil company means IPO may not raise as much as expected

Saudi Aramco, the state-run oil company, is to be listed on the Tadawul exchange.

No details about price or when the listing will occur have been released. Reports suggest trading will start next month.

The volume of shares offered is also uncertain but predictions put the amount at between 1 and 2 per cent of the company, reported to be the world’s most profitable.

Aramco produces 10 million barrels of oil per day and reported $111bn in net income in 2018, earning a 41 per cent return on average capital employed.

The sale was expected to raise between $20bn (£15.46bn, €17.91bn) and $40bn. That figure could be based on a company valuation of $2 trillion – the value that Saudi’s Crown Prince Mohammed bin Salman had in mind in 2016 when the idea of an IPO was first mooted. Recent valuations put the firm at $1.5 trillion. Goldman Sachs told investors it thought Aramco was worth between $1.6 trillion and $2.3 trillion.

The lower valuation is due to depressed global energy prices linked to a US crude oil production increase, and the drone attack on Aramco in September. The move to sell Aramco is part of the Crown Prince’s plan to reduce the state’s dependency on oil.

The world’s biggest IPO was Chinese ecommerce company Alibaba in 2014, which raised $25bn.

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