Aramco CEO Defends IPO Plan in Face of Investor Skepticism

(Bloomberg) -- The chief executive officer of Saudi Aramco defended prospects for an initial public offering of the giant oil company in the face of investor skepticism and government prevarication on when and where it will happen.

"There’s a lot of work that is still ongoing, the IPO is ongoing," Amin Nasser said in a Bloomberg television interview in New York, reiterating that the company will be ready for a listing in the second-half of this year.

Still, he said that it’s the government who will take the final decision.

"The venue and the timing is the government,” he said. “Don’t forget this is a very complex process. Aramco’s size and complexities is something that requires time."

For almost two years, Saudi officials said again and again the IPO was "on track, on time" for the second half of 2018. But for the first time this month they suggested it could be delayed until 2019, pushing back a central plank of Saudi Crown Prince Mohammed bin Salman’s plan to modernize the economy.

The Aramco IPO would be a once-in-a-generation event for financial markets. Saudi officials said they hope to raise a record $100 billion by selling a five percent stake, valuing the company at more than $2 trillion and dwarfing the $25 billion raised by Chinese Internet retailer Alibaba Group Holding Ltd. in 2014.

The international IPO is proving difficult for several reasons. First, Prince Mohammed has said publicly Aramco should be valued at $2 trillion or more, a figure few outside the kingdom see as realistic. Saudi authorities are also struggling to reconcile their desire for the biggest possible pool of capital to achieve a high valuation, probably found in New York and London, with their preference for relaxed regulation, which would point to Hong Kong.

Prince Mohammed, who’s made the IPO a key part of his ambitions to ready the economy for the post-oil age, is touring the U.S., visiting cities from Washington to Houston. So far, American investors have given the IPO a cool response.

Yet, the Aramco CEO said he saw lots of appetite for the IPO in America and elsewhere. "I think there is a lot demand for the listing of Aramco. This is a great company," he said.

Nasser offered few clues about how Aramco will attract investors, only saying the company will be "competing" with the best in Big Oil. "In terms of dividend, rate of return, that all we’ll share with investors when we go on roadshow," he said.

Khalid Al-Falih, the Saudi oil minister, over the weekend acknowledged that some U.S. investors had been slow to sign on the reform proposed by Prince Mohammed dubbed "Vision 2030" because they are focused on dividends.

“We are going to have to face that when we list Aramco and have a conversation about how much cash will be given to investors,” he said in a speech Saturday at the Massachusetts Institute of Technology in Boston.

Nasser said he planned to direct investment into refining and petrochemicals, growing the so-called "downstream" side of the business, rather than increase the company’s current oil production capacity of 12 million barrels a day.

Asked what Aramco would look like in 2030, he said, "more integrated, more of our barrels will go into petrochemicals, rather than refineries. Shifting more downstream, adding more value into the barrel through downstream."

©2018 Bloomberg L.P.