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Saudi Aramco plans to list on the Riyadh Stock Exchange and said the world's largest initial public offering (IPO) will be possible.
The state-owned oil company will determine the IPO launch price after registering investors' attention.
According to business sources, Saudi Arabia is expected to have access to 1{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} or 2{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} of the company's shares, and the offer is for existing company shares.
Saudi Aramco is thought to be worth about $ 1.2 trillion ($ 190 billion).
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The company said it has no plans to list foreign stocks at the moment, saying it has put aside plans for a long discussion of a two-phase IPO, including a forex trading proposal.
Aramco Chairman Yasir al-Rumayyan, referring to the Saudi Stock Exchange, said in an interview with the press that "Of course, I'll tell you about the (international) listings.
"Investing in Aramco not only entails risks, it's not only difficult for oil prices to rise, but also risks," said Chris Beauchamp, senior market analyst at derivatives trading company IG Group.
Aramco also has high political and strategic risks for companies operating in Saudi Arabia's arms, the region. Aramco said limited control over production policy, a key part of Saudi Arabia's Opec management.
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These potential risks were highlighted in September when they hit the Aramco-owned Saudi Arabia's Abkhazi oil rig and the Ku Rice Field.
But Amin Nasser, Aramco's president who called the plan "historical," told a press conference that the company is still the most trusted oil company in the world after the IPO statement was issued.
Aramco said in a launch announcement, "The company does not expect the impact of these attacks to have a significant impact on business, financial position or operational results."
What is Saudi Aramco?
Saudi Aramco signed a contract with a standard oil company in Saudi Arabia and California (which later became Chevron) and in 1933 researched and drilled oil to create a new company.
Between 1973 and 1980, Saudi Arabia acquired the entire company.
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Saudi Arabia has the second largest oil reserves after Venezuela, according to the Energy Intelligence Agency. It is also second in production after the United States. But it gains its importance because it has a monopoly on all oils in the country and because its extraction cost is cheap.
In essence, it's the largest quoteless company in the world. Said David Hunter, director of market research at Schneider Electric.
"This is the absolute mother of all oil and gas companies."
Why is so much money worth it?
According to a financial news service Bloomberg's analysis, Saudi Aramco is worth $ 1.2 trillion, but Riyadh would prefer a $ 2 trillion valuation, so the company's stock sale was delayed several times.
Beauchamp of the IG Group said, "Aramco is far from an IPO in every technology sector these days, but as with Silicon Valley companies, it is still plagued by evaluation issues."
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"In a world with high oil supply and uncertain demand, $ 2 trillion exaggerates the company's value, but $ 1.2 trillion is too low for an important part of the Saudi country," he added.
Either way, it's incredibly profitable. Net profit for the first half of 2019 was $ 44.7 billion, mostly paid out as dividends to Saudi Arabia. Profitable companies attract high prices. In comparison, the world's largest value company, Apple, now reported net income of $ 211.1 billion, while the largest publicly traded oil company, Exxon Mobil, made $ 5.5 billion.
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Another aspect is the cost of production. Located under hundreds of feet of water, it is expensive to extract North Sea oil, while Saudi Arabia's oil is relatively close to the surface.
Hunter points out that Saudi has the cheapest oil per barrel and costs less than $ 10 a barrel. If the price of Brent oil is more than $ 60, much of that difference can be profitable.
Why does Saudi want to sell stocks?
Saudi Arabia wants to sell shares to state oil companies because it is trying to reduce its dependence on oil.
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The company was established after a contract between an American oil company and Saudi Arabia
Prince Mohammad bin Salman wants to diversify his economy over the next decade with a program called Vision 2030.
Hunter said the plan includes more solar power, taking advantage of the vast desert.
Analysis: Ellen R Wald, author "Saudi, Inc." and President of Cross-Consulting
The first Saudi CEO of Ali al-Naimi had a vision that Aramco could become a global integrated energy company. During his years as CEO, he expanded Aramco's assets to include downstream (refined) and other assets in the United States, Korea, China, Indonesia, Japan, and Europe.
He and his successors expanded Aramco's footprint in Saudi Arabia through joint ventures in refining and petrochemicals. Saudi Arabia is today the largest oil exporter and the only oil producer to supply the market very quickly, with a reserve capacity of at least 2 million barrels per day.
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The fact that you are a national oil company means you have exclusive access to the world's cheapest and least-produced oil resources. This is very worth it. But there are disadvantages. Saudi Arabia's upstream assets are not as diverse as other major international oil companies. It also means that the Saudi government plays a role in the company. Historically, Saudi Arabia allowed Aramco to operate independently and did not determine spending on the company's strategy. The problem is that the situation is changing and the government is playing a more active and harmful role.
The actual value of Aramco is determined by the market. The bank has offered valuations, but the market will show how much it really is worth. Another source quoted an evaluation ranging from $ 1.2 tn to $ 2 tn.
Currently, the number that comes to mind most is about 1.5 trillion won, perhaps $ 1.7 trillion. But public feelings probably indicate that this is too high. Who knows Aramco's value for 30 years. We do not know what other energy technologies will develop at that time and what Aramco's strategic vision will produce.
In September, the UK opened its doors to international tourists for the first time and said it would launch a visa scheme in 49 countries and ease strict dress codes for female visitors.
Tourism Minister Ahmad al-Cate eb described the country as a "historical moment". By 2030, we want tourism to increase from 3{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} to 10{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} of GDP.
Last year's crackdown on journalist Zamal Khashoggi and recent crackdowns on human rights activists, in the criticism of the human rights record, has pushed Britain to undermine its international image.
Why sales are controversial
Hunter points out that Saudi Aramco's problem is rather complicated in light of the recent Kashogi scandal.
"And the facts of Saudi Arabia's human rights record. What is associated with Saudi Arabia can always be seen through its prism."
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Aramco is the world's largest oil company
Another wrinkle in the Crown Prince plan is the surge in fossil fuel sentiments around the world and relatively low oil prices compared to the end of last year when prices exceeded $ 80 at the end of last year.
Hunter said, “This list is controversial because it's a huge list of fossil fuels at times when investors are becoming more and more ethical.
"There are a lot of new and existing funds we want to sell off our fossil fuel assets."
In May, a fellow oil producer, Norway's $ 1 trillion sovereign wealth fund, expected to sell some oil and gas reserves, although it is less dependent on fluctuations in commodity prices.