Saudi Arabia is reportedly contemplating a secondary share offering for its state-owned oil behemoth, Saudi Aramco (2223.SE), with plans to raise a substantial sum of at least 40 billion riyals, equivalent to $10 billion, potentially commencing as early as February, according to sources familiar with the matter cited by Bloomberg News.
This development follows a recent directive from the Saudi government instructing Aramco to cease its expansion plans in the oil sector.
Instead, the state-owned oil giant is now focusing on achieving a maximum sustained production capacity of 12 million barrels per day (bpd), a million bpd lower than the target announced in 2020.
This strategic shift has been in the works for approximately six months, driven by the realization in Riyadh that its existing substantial spare capacity is more than sufficient to meet market demands during crises.
Consequently, further investments in new oil fields were deemed economically impractical.
Saudi Aramco, renowned as the world’s largest oil company, boasts a staggering market value of $2.02 trillion. In late 2019, it successfully executed the most extensive initial public offering (IPO) in history, raising an impressive $25.6 billion.
Subsequently, it conducted additional share sales to amass a total of $29.4 billion in funds.
In response to the news of the forthcoming follow-on offering, the company’s shares experienced a minor dip of approximately 2%. Saudi Aramco refrained from providing an official comment on the matter.
Presently, the Saudi government holds a direct ownership stake of 90.19% in Aramco, with the sovereign Public Investment Fund (PIF) owning an additional 4%.
PIF subsidiary Sanabil also holds a 4% stake, as indicated by data from the London Stock Exchange Group (LSEG).
Notably, in September of the previous year, reports from the Wall Street Journal indicated that Aramco was considering a secondary share offering worth as much as $50 billion on the Riyadh Stock Exchange, following consultations with financial advisers.
The prospect of this follow-on offering underscores Saudi Arabia’s efforts to diversify its economy and reduce its dependency on oil revenues by unlocking the value of its prized national asset, Saudi Aramco.