Published: Thu, November 07, 2019
Money | By Ethel Goodwin

Saudi Aramco’s Nine-Month Profit Falls 18% as IPO Starts

Saudi Aramco’s Nine-Month Profit Falls 18% as IPO Starts

The state-owned company produces 10 percent of the world's oil and generated $11 billion past year in profits.

In September, Aramco achieved $68.2 billion of profit, up from $83.3 billion in the same period in 2018.

Saudi Arabia's Crown Prince Mohammed bin Salman, on Friday agreed that the initial public offering (IPO) of state oil giant Aramco will be announced on Sunday, five sources familiar with the matter told Reuters.

Aramco, which produces about one-tenth of the world's oil output, is the centerpiece of the Saudi economy, and generates most of the government's revenue.

Aramco Chairman Yasir al-Rumayyan said a decision on an worldwide listing would be made in the future.

The recent announcement that the partial initial public offering (IPO) of Saudi Aramco is finally moving forward is either a cause for celebration or consternation, depending on your perspective. This is a blow for London, which was among those vying to list the oil company, but may have been knocked out of the race due to political uncertainty around Brexit. This is US$0.5 trillion less than what was the main idea of IPO of Crown Prince Mohammed bin Salman four years ago.

Seeking to diversify its economy apart from oil, the proposed IPO of Saudi Aramco will be the world's biggest listing.

Amin H. Nasser, president and CEO of Saudi Aramco, said, "Saudi Aramco's vision is to be the world's pre-eminent integrated energy and chemicals company". Last week, BP reported a 41% fall in third-quarter underlying replacement cost profit to $2.25 billion, reflecting lower oil and gas prices, maintenance and weather impacts.

"I'm glad to announce that Aramco has got the approval from the capital market authority for an IPO in the Saudi market".

The company "lifts" 11.6m barrels of oil every day and has reserves of 227 million barrels.

Saudi Arabia's state-run oil company has formally confirmed its long-awaited plans to sell shares in what could be the world's biggest listing.

Aramco said the IPO timetable was delayed because it began a process to acquire a 70% stake in petrochemicals maker Saudi Basic Industries Corp (2010.SE).

Although the float was expected in 2018, it was pushed back following doubts that it would be able to secure the coveted £1.5trillion valuation. Back then, Saudi Arabia struck a deal with California's Standard Oil Company, which was later renamed into Chevron.

"Aramco would become the largest company by market cap in the MSCI EM index following listing but would account for only 0.5-0.6% of the index given an expected low index weighting", Bernstein analysts said in a note on Tuesday.

IPO preparations were revived this summer after Aramco attracted huge interest in its first global bond sale, seen as a pre-IPO relationship-building exercise with investors.

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