Saudi oil giant Aramco is valued at US $ 1,500 billion

Banks set many valuations for Aramco, but on average it is difficult to reach the goal of $ 2,000 billion of the Saudi government.

Yesterday, Saudi Aramco submitted an IPO document to Tadawul in Riyadh (Saudi Arabia). Leaders of this company prepare to carry out an international roadshow to attract investors. Next month, they plan to publish a prospectus and the stock could start trading in December 2019.

According to a report by the banks involved in the Saudi Aramco IPO, on average, the value of the Saudi state-owned oil company may be around $ 1,500 billion or less, far below the $ 2,000 billion target of this country.

The report also shows that banks are struggling with finding the correct pricing for Aramco. Some even offer huge gaps between the lowest and highest estimated prices.

Bank of America valued Aramco at about US $ 1,220 – 2,270 billion. This gap is even equal to the total capitalization of the world’s three largest listed energy companies – Exxon Mobil, Royal Dutch Shell and Chevron.

Goldman Sachs said that the value of Aramco is about 1,600 – 2,300 billion USD. “Note that our valuation framework is based on long-term analysis and is not relevant to the short-term assessment of the potential performance of the stock,” the firm said in a report to investors. Their calculations are based on oil prices of $ 64.5 a barrel this year and $ 60 for the period 2020-2023.

HSBC – one of the banks responsible for this IPO – valued at 1,590 – 2,100 billion USD. BNP Paribas also gave a fairly detailed number, which is 1,424 billion USD.

JP Morgan Chase did not publish valuation, but forecasted Aramco’s financial situation. They claim that in order to break even this year after paying huge dividends, the company needs oil prices at $ 64.2 a barrel. In the period of 2020-2023, the target oil price will be below 60 USD.

Aramco’s IPO is part of Saudi Arabia’s leadership’s plan to help the economy avoid relying too much on oil and develop other fields. “The IPO will increase our international presence, as a leading company,” CEO Amin Nasser said at a press conference yesterday.

Chairman Yasir al-Rumayyan confirmed that the number of shares sold and the valuation will be announced after the book building process is completed. How much the offering is said to depend largely on domestic investors.

Last year, the Saudi government discussed the sale of a 5% stake, raising about $ 100 billion. They want to list on multiple exchanges, like New York or London, next to Riyadh.

However, the IPO plan was later shelved, due to concerns about legal regulations in the US, as well as investors who doubted the valuation of $ 2,000 billion that Saudi Arabia’s leader made. This hope only revived earlier this year, when Aramco successfully implemented an international bond offering.