The rationale for state-controlled Saudi Aramco's decision to launch a secondary public offering is not only to provide funds to the Saudi government for its massive socio-economic transformation plan but also to broaden the company's shareholder base among local and international investors, chief executive Amin Nasser said.
Aramco revealed yesterday that it plans to sell 1.545bn shares, equivalent to about 0.64pc of the company, in a secondary public offering due to kick off on 2 June. The shares are expected to be priced in a range of 26.70-29 Saudi riyals ($7.12-$7.73) each, which means the firm could raise $12bn at the top end.
Proceeds could be as high as $13.1bn at the top end of the range if Aramco chooses to exercise an over-allotment option, which would allow the sale of around 1.7bn shares. Aramco's closing share price on 30 May stood at SR29.
"The offering provides us with an opportunity to broaden the shareholder base among both Saudi and international investors," Nasser said. "It also offers us an opportunity to further increase liquidity and to increase global index weighting."
The offering has been years in the making. Aramco's initial public offering (IPO) in 2019 raised a record $29.4bn. The secondary offering will test international investment appetite for fossil fuels in the face of growing concerns over global climate targets.
Nasser points to four key performance-related reasons as to why he views Aramco as an attractive investment opportunity. The first is the company's competitive advantage due to scale, cost efficiency and low upstream carbon intensity. The second is Aramco's differentiated growth opportunities across upstream, downstream, carbon capture, hydrogen and renewables. The third is its financial strength and the fourth its dividend distribution policy.
"We distributed a record $98bn in 2023 and we anticipate distributing over $124bn of dividends in 2024. This would represent an almost 30pc increase from 2023," Nasser said.
Proceeds from the offering will help fund Saudi Arabia's Vision 2030 initiative, a government programme which aims to achieve increased diversification economically, socially and culturally. Saudi Arabia's finance minister Mohammed al-Jadaan suggested last month that the country may make changes to its plans, including delays or acceleration for some projects.
Saudi Arabia recorded a sixth straight quarterly budget deficit in January-March this year, as spending outpaced revenue on the back of lower energy prices and curbs on its crude production.
The launch of the secondary offering on 2 June coincides with an Opec+ ministers' meeting to decide whether to extend the group's current voluntary crude supply cuts into the second half of the year.
