SAUDI: Aramco’s valuation and the IPO’s impact on bond issuance

GULF COUNTRIES - Report 05 Nov 2019 by Rory Fyfe and Justin Alexander

​Information is trickling out about the Aramco IPO. Given the years of preparation and then the latest delay in October, it’s somewhat surprising that more wasn’t announced last Sunday. Our report includes an overview of valuations (a massive range from $1.1-2.3trn), the likely impact of the IPO on bond issuances (less from PIF and Aramco, more from the government and others) and the timeline ahead.

More valuation estimates have been coming out. We haven’t seen the full details of most of them and so are not able to make an informed assessment of their methodologies and assumptions. Our own estimate of $1.25trn is fairly rough and is based on the current oil futures curve.

Aramco’s opex and capex costs are reasonably well understood, as is its reserve position. Obviously, the oil price will be the main valuation driver, and so a range of valuations based on different oil scenarios makes sense. Aside from that, and relative to peers (such as the private oil majors - the top five of which have a combined market cap of $1trn), there are therefore four main variables that should drive valuation.

Now read on...

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