Total Eyes Stake in Aramco

EghtesadOnline: Taking part in the much-anticipated IPO of Saudi Arabian Oil Company, known as Saudi Aramco, is not off the table for oil major Total SA because it could be a "good investment", the French group’s chief executive said on Thursday.

News ID: ۷۴۱۲۴۰

29 April 2017

“We may consider it,” Total’s CEO Patrick Pouyanne said, referring to the Aramco IPO, at an oil industry conference in Paris, Oil Price reported.

But he noted that any study of a possible participation is premature before more details on the Saudi plans become available.

“I’m sure that it would be a good investment ... because Saudi Aramco has a real business case,” Pouyanne said.

Saudi Arabia plans to list up to 5% of its crown jewel next year, on one or more international markets. The deputy crown prince, Mohammad bin Salman Al Saud, has said that Aramco’s value could be $2 trillion, which means that 5% would fetch $100 billion for the kingdom.

But since the staggering $2 trillion valuation was first aired, institutional investors, fund managers, and industry professionals have been trying to find valuation metrics that add up to this figure.

Most of the attempts at estimates are largely based on assumptions and speculation regarding how much oil reserves Saudi Arabia really has, which Aramco businesses would be included in the listed entity, how much income taxes and revenue royalties the company would pay to Saudi Arabia, as well as where oil prices would go a year from now.

Analysts are mostly valuing Aramco at below $1.5 trillion, although Saudi Arabia slashed the tax rate on Aramco to 50% from 85% in a bid to attract international investors and raise the company’s value. Recently, a Wall Street Journal report suggested that officials at Aramco are applying internal value estimates of $1.3 to $1.5 trillion to the valuation, calling deputy crown prince’s estimate “unrealistic and mind blowing.”