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Aramco to raise up to $13bn from new share offering

Aramco's Expec advanced research centre in Dhahran, Saudi Arabia. The government will receive all of the net proceeds of the Aramco offering Saudi Aramco
Aramco's Expec advanced research centre in Dhahran, Saudi Arabia. The government will receive all of the net proceeds of the Aramco offering
  • World’s largest oil producer selling 0.64% stake
  • Five days of investor meetings planned
  • 10% allocated to retail investors

Saudi Aramco confirmed on Thursday that it aims to raise up to $13 billion in a secondary public offering next month, as Riyadh seeks out new sources of funding to finance its portfolio of giga-projects.

The world’s largest oil producer will sell a 0.64 percent stake, or 1.545 billion shares, in an offering that will commence on Sunday.

Aramco raised $25.6 billion through its initial public offering in December 2019, which was the “biggest IPO in history”.

The price range is expected to be between SAR26.70 and SAR29 ($7.12 and $7.73) per share, raising between $11 billion and $12 billion.

The value of the offering may increase to $13.1 billion at the upper limit if the “greenshoe option” is exercised. A greenshoe option is a provision in an IPO underwriting agreement granting the underwriter the right to sell more shares than originally planned.

This option would allow the sale of 1.7 billion shares, or a 0.7 percent stake, enabling bankers to use these shares to stabilise the offering price.

The book-building period for institutional investors starts on Sunday and will end on June 6. Aramco plans to conduct several meetings with institutional investors for five days, beginning Sunday.

Nearly 154.5 million shares, representing 10 percent of the offering, will be allocated to retail investors.

The government will receive all of the net proceeds of the offering but will reimburse Aramco for all fees, costs and expenses it incurs in connection with the offering.

It allows Aramco to broaden the shareholder base among Saudi and international investors, Aramco CEO Amin Nasser said.

The new share sale will also offer an opportunity to boost liquidity and increase global index weighting, he added.

Saudi Arabia’s top economic body discussed the progress of the kingdom’s Vision 2030 plan this week, citing a recent government report that 87 percent of its projects are “on the right track”.

Analysts speculate that some projects will be pared back or reorganised in light of budget deficits, higher interest rates and a dearth of foreign investment. Announcements from officials suggested that some projects will be stretched out beyond 2030.

James Swanston of Capital Economics in London said the meeting shows that Saudi Arabia’s government and the Public Investment Fund (PIF) – the kingdom’s sovereign wealth fund which owns the giga-projects – are “seriously reconsidering the state of Vision 2030 and how much of their resources they can commit to it”.

Although it is valued at $925 billion, PIF carries the burden of funding $1.25 trillion of projects. Some of this will be alleviated by the forthcoming Aramco share sale.

Crown Prince Mohammed bin Salman said in 2021 that Saudi Aramco was in talks to sell more shares and the proceeds would be used to bolster PIF.

“There will be Aramco share offerings coming in the coming years, and this cash will be transferred to PIF,” Prince Mohammed said at the Future Investment Initiative conference.

The state-owned energy major this month announced a $31 billion dividend payout in the first quarter, with total dividends expected to reach more than $124 billion in 2024.

Aramco’s first-quarter 2024 net profit fell 14 percent to over $27 billion due to lower oil prices and volumes.

The government holds an 82 percent stake in Aramco, and dividends constitute a significant part of its revenue. PIF owns 16 percent, while 2 percent is publicly traded.

Aramco has postponed plans to increase its output capacity from 12 million barrels to 13 million barrels per day. It aims to increase its gas output by 60 percent.

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