Adnoc targets foreign listing of investment arm XRG

Abu Dhabi National Oil Company (Adnoc) is considering listing its international investment arm XRG on an exchange outside of the UAE, three people with knowledge of the matter said.

This could potentially create one of the largest listed energy companies in the world.

The discussions to list a minority stake of XRG, which was established late last year, are at a very early stage. Bank of America is advising the company on strategy, including the possibility of listing on an international exchange, the sources said.

Any flotation would be in about five years, one of them added.

Before pursuing an IPO, Adnoc would need to appoint a CEO for XRG and transfer assets into the company.

An eventual listing is the goal for XRG and is in line with the state oil giant’s strategy, said other sources familiar with Adnoc’s thinking who are not involved in the deliberations.

Adnoc and Bank of America declined to comment.

XRG, which Adnoc has said has $80 billion in assets, has a mandate to pursue global deals in chemicals, natural gas and renewables, as the emirate seeks to build a globe-spanning portfolio in those areas and rely less on revenue from oil exports.

London or New York exchanges are among the options for the flotation of XRG shares.

London could be an attractive venue because it has been home to global oil and gas companies such as Shell and BP, even if it has faced fund outflows in recent times. A US listing, however, could potentially offer a higher valuation. Shell has considered moving there.

Even if valued in line with Adnoc’s stated asset valuations, listing a small percentage of XRG could make it the largest ever energy IPO in either jurisdiction.

The domestic IPO of neighbouring Saudi Arabia’s oil giant Aramco in 2019 was the world’s largest ever public debut of a company. It raised $29.4 billion.

UAE President Sheikh Mohamed bin Zayed Al Nahyan is the chair of Adnoc’s board, which approved an accelerated international growth strategy backed by $150 billion between 2023-2027.

A new department was set up at Adnoc Group to help implement the strategy before XRG’s creation. Adnoc explored buying BP, Reuters reported last year. Preliminary deliberations did not progress.

Going global

XRG’s board features ex-BP boss Bernard Looney, Blackstone President Jon Gray and Egyptian billionaire Nassef Sawiris.

Adnoc has struck several international deals for assets to sit under XRG, including a deal this week with Austria’s OMV to merge their petrochemical businesses Borouge and Borealis, which will acquire Canada’s Nova Chemicals, owned by Abu Dhabi wealth fund Mubadala.

The merged entity, Borouge Group International, will have a $60 billion enterprise value and be the fourth largest polyolefins company by production capacity, behind China’s Sinopec and CNPC and US-based ExxonMobil.

In October, Adnoc bought German chemicals maker Covestro for €14.7 billion ($15.31 billion), including debt. The business also sits under XRG.

Adnoc has also invested in assets beyond chemicals for XRG including a stake in NextDecade’s Rio Grande liquefied natural gas (LNG) export facility in Texas and an investment in an ExxonMobil Texas hydrogen project.

Adnoc also owns 24 percent of Masdar, the Abu Dhabi state-backed renewables company that has been on its own acquisition blitz as it races to roughly double its generation capacity to 100 gigawatts by 2030.

Adnoc began a string of listings for its subsidiaries with its fuel retailer in late 2017. From 2021, it went onto list units for drilling, fertiliser, gas and logistics, as well as Borouge.

Adnoc also sold stakes in subsidiaries with long-term lease rights to its crude and gas pipeline networks.

Those deals and sales of stakes in its units have raised more for Adnoc than Aramco’s blockbuster 2019 IPO, Reuters calculations show, although Aramco raised another $12 billion last year by floating a tiny stake.