by Vivian Nereim, Wael Mahdi, and Bruce Stanley
An audit of state oil producer Saudi Aramco’s crude reserves is showing “very reassuring” results ahead of what could be the world’s biggest share sale when the company sells a stake to investors next year, the kingdom’s energy minister said.
The independent audit will be completed in the near future, and its results will be part of the prospectus for the initial public offering by Saudi Arabian Oil Co., known as Saudi Aramco, Energy Minister Khalid Al-Falih told reporters Thursday in Riyadh. Aramco will disclose its 2017 annual statements prior to the listing scheduled for next year, and the company is likely to sell shares on three stock exchanges, he said at a seminar earlier in the day.
“So far, the correlation between what they have determined and what Aramco has booked on its own books and announced in the past is very reassuring,” Al-Falih said of the audit. The results so far are “in the positive side” and higher than the company’s own reserves estimate, Al-Falih said, declining to identify the auditors.
The kingdom plans to sell up to 5 percent of Aramco as part of plans by Deputy Crown Prince Mohammed bin Salman to set up the world’s biggest sovereign wealth fund and reduce the economy’s reliance on oil. Saudis have estimated the entire company to be worth more the $2 trillion. Saudi Arabia, the largest oil exporter, estimates that it holds more than 266 billion barrels in crude reserves, and it pumped 10.48 million barrels a day of oil in December, data compiled by Bloomberg show.
“Even if we sold 5 percent as we intend, no market in the world can absorb an IPO of this size,” he said. “The intention is for there to be several markets, at least two, likely three, in which the shares are presented.” The base listing will be in Riyadh, the Saudi capital, “but there will be other markets also,” Al-Falih said, without identifying them.
Aramco officials have previously mentioned listing on bourses in London, Hong Kong, Tokyo, New York and Canada.
“I am sure that the world, without exaggeration, will be amazed by the capabilities of the company to get the highest value, not only because of the natural resources that it has but also because of the efficiency of its work and production,” Al-Falih said.
Auditing Aramco’s reserves isn’t an easy process, said Sadad al-Husseini, a former executive vice president of exploration and development at the company and a former board member.
Bottom of Form
“The best that an external auditor of reserves can do is to audit the quality of the data and the process by which Aramco calculates its data,” al-Husseini said by phone from the eastern city of Dhahran. “The whole point of doing an external audit for Saudi Aramco’s reserves is not to market the company’s IPO but to show to investors the sustainability of Aramco’s production capacity, and this is what will interest investors the most.”
Aramco is asking banks including Goldman Sachs Group Inc. and HSBC Holdings Plc to pitch for an advisory role on its IPO, three people with knowledge of the matter said last month. The company has also sent out the so-called request for proposals to lenders including Credit Suisse Group AG and Morgan Stanley, the people said, asking not to be identified as the process is private.
“The foreign investor is in need of more information, and we are working over the coming period to get assistance from specialized financial institutions to prepare for the IPO,” Al-Falih said.