September 17, 2019 / 12:05 PM / a month ago

Saudi Aramco pursues IPO planning despite attack damage doubts

RIYADH/LONDON (Reuters) - Saudi Aramco is pressing on this week with banker meetings about its planned listing, three sources said, although some investors and analysts doubt it can now meet its timeline after the weekend attacks on its oil facilities.

FILE PHOTO: A production facility is seen at Saudi Aramco's Shaybah oilfield in the Empty Quarter, Saudi Arabia, May 22, 2018. REUTERS/Ahmed Jadallah/File Photo

Reuters has reported it could take months for Aramco, the world’s biggest oil firm, to restore output after Saturday’s attacks, which cut production by 5.7 million barrels per day, some 5% of world oil supply.

Saudi’s cabinet said on Tuesday that it has now reviewed the impact of the attacks on Aramco installations, with the country’s energy minister due to hold a news conference at 1715 GMT to give the government’s first public update. The state-owned oil group will meet local Saudi banks to discuss the initial public offering (IPO) plans, but bankers at international lenders working on the IPO told Reuters there had been no communication from Aramco’s management on any delay.

Aramco, which did not respond to a Reuters request for comment, is continuing to prepare for a local IPO, which the sources said may happen as early as November.

Reuters has reported that Aramco plans to sell 1% this year, in a potential $20 billion deal, and another 1% in 2020 in Riyadh ahead of an international sale.

Three sources close to the deal said meetings scheduled this week with Saudi banks to discuss the underwriting work they will do in the offering are still scheduled to take place.

But other sources, including bankers and investors, said while work would continue, the attacks would have an impact.

“The train has left the station. But it’s a pretty major event and a lot will depend on how quickly the damage will be repaired,” one banker said.

The Aramco IPO is a pillar of an ambitious economic diversification drive by Crown Prince Mohammed bin Salman, who has put the firm’s valuation at $2 trillion. The domestic flotation is the first step of a targeted 5% sale.

“It would seem logical that Aramco’s IPO will be delayed while the damage is assessed but beyond this we would expect that the risk premium that investors will require should the IPO go ahead will now be higher,” said Piers Hillier, chief investment officer at Royal London Asset Management. Saudi Arabia, the world’s top crude exporter, recently accelerated plans for the IPO, naming a new chairman for Aramco and mandating 9 banks in top roles.

A separate source with knowledge of the deal said Aramco has already carved up the different tasks for banks such as determining valuations, organising roadshows and focusing on certain geographic areas.

“The banks continue to work on it until they are told otherwise. The sense is that they want it done as quick as they can,” the source said.

ARAMCO VULNERABILITY

An Aramco pre-IPO meeting with analysts, both local and international, is scheduled for next week at Aramco’s headquarters in Dhahran, two sources, said, with one adding that the meeting would still go ahead as planned despite the attack.

Even before the attack, Aramco was looking to place part of the offering to wealthy Saudi individuals to ensure demand, two other sources familiar with the matter told Reuters.

However, some analysts and investors said the strikes could pose a major setback to the Aramco offering.

Oil prices surged over supply concerns and the threat of a military response to the assault on the heartland of the Saudi oil industry, which U.S. officials blamed on Iran, a charge Tehran denies. Dollar-denominated bonds issued by the Saudi government and Aramco hit multi-week lows on Monday, but rebounded on Tuesday.[O/R] “Even if Saudi Arabia’s oil facilities are quickly restored, the weekend’s attacks will raise concerns of potential geopolitical risk and the level of premia required,” said Monica Malik, Chief Economist at Abu Dhabi Commercial Bank, in a research note. “The developments also have significance ahead of the planned part-IPO of Aramco, highlighting the potential vulnerability of its key infrastructure and raising questions over the appropriate level of risk to be factored in the valuation.” Banks including JPMorgan, Morgan Stanley and Goldman Sachs have been appointed to coordinate the deal, which has already faced repeated delays and is crucial for Prince Mohammed’s plans to diversify the Saudi economy in an era of low oil prices.

Additional reporting by Saeed Azhar, Hadeel Al Sayegh in Dubai; Stephen Kalin in Riyadh; Simon Jessop in London; David French in New York; Writing by Davide Barbuscia; Editing by Ghaida Ghantous and Alexander Smith

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