Saudi Arabia poised for new Aramco share sale -sources

Saudi Arabia is poised to sell more shares of energy giant Aramco, three people familiar with the matter said, which could boost the country’s funding and its aim to wean the economy away from oil.

The government has lined up Citigroup, Goldman Sachs and HSBC for the sale, one of the people said, which could take place in the second or third quarter of this year, a second person said. The share sale could raise about $20bn, according to Bloomberg, which first reported the news.

The preparations are ongoing and the details could change, the people said. The government’s communication office did not have an immediate comment. Aramco declined to comment.

Saudi Arabia needs hundreds of billions of dollars to achieve the objectives of its economic transition plan known as Vision 2030, which puts an expanded private sector and non-oil growth at the centre of its future development agenda.

It forecast a budget deficit of SAR79bn ($21.07bn) in 2024, or about 2 per cent of GDP, although some analysts expect this figure to be much higher on the back of higher spending needs.

Aramco’s production u-turn

A share sale would come on the heels of a government edict in January ordering the state oil company Aramco to halt its oil expansion plan and to target a maximum sustained production capacity of 12 million barrels per day, one million bpd below a target announced in 2020. A move that could redirect funds back to the treasury, some analysts have said.

The kingdom has already tapped debt markets for $12bn so far this year to help plug the deficit.

Aramco in each of the last two quarters paid its shareholders nearly $10bn in performance-linked dividends announced earlier in 2023, on top of Brent-linked royalties and $19.5bn base dividends paid each quarter.

It completed the world’s largest initial public offering in late 2019, raising $25.6bn and later selling more shares to raise the total to $29.4bn.

Saudi Arabia’s Crown Prince Mohammed bin Salman, the kingdom’s de facto ruler, in January 2021 said that Aramco would sell more shares, with proceeds used to bolster the country’s main sovereign wealth fund.

The Saudi state remains overwhelmingly Aramco’s biggest shareholder and heavily relies on its payouts. The government directly holds 90.19 per cent, the sovereign Public Investment Fund (PIF) 4 per cent and PIF subsidiary Sanabil another 4 per cent, according to LSEG data.

Aramco is due to release its full-year 2023 financial results in March, when it is expected to provide an update on its capital expenditure, now widely expected to be revised downwards following the capacity decision.

Read: Saudi Aramco Q3 profit falls 23% on lower crude oil prices, volumes