Aramco IPO called off; against booming oil prices and takeover of Sabic

Saudi Arabia’s state-owned oil/gas company Saudi Aramco has cancelled its plans to list the company both on the domestic and international stock markets and disbanded advisers, citing Reuters industry sources. First announced 30 months ago, the initial public offering (IPO) was expected to be the largest ever globally and underpinned an ambitious plan by Crown Prince Mohammed bin Salman to overhaul the Saudi economy.

The IPO listing has now become less urgent because oil prices have rebounded above US$70 a barrel, thus relieving pressure on Saudi finances, say industry sources.

The Saudis had hoped to attract a US$2 trillion valuation for Aramco, the world’s largest oil company, with the Crown Prince originally stating the floatation of 5% of Aramco on international exchanges would raise US$100 billion. However, some analysts had said the valuation was unrealistic and pegged the value of the firm at half that amount.

Doubts on the IPO listing began cropping up as the country started deferring decisions on key parts of the stock market debut, including where to list shares overseas. As well, earlier this year, Aramco had also said it would first list on the domestic stock exchange, the Tadawul, and put off an international listing.

One Reuters source said the decision to cancel the IPO had been made “some time ago.”

Aramco is now focusing on acquiring a stake in Riyadh-headquartered petrochemical/polymers company Sabic. In July, Aramco had confirmed that it had entered talks with Sabic’s main owner, Public Investment Fund, to acquire a “strategic stake” in Sabic.

This move would be consistent with Aramco’s strategy of diversifying into high value businesses, including refining crude oil into fuels and processing by-products into petrochemicals like plastics. Aramco currently focuses on producing crude oil from that nation’s vast oil reserves.