Saudi Aramco's Share Sale: A Success Worth $12 Billion
Details of the Sale
Saudi Aramco, the energy giant of Saudi Arabia, recently confirmed their plans to sell shares in the state-owned oil company. This move is intended to fund the kingdom's plans to diversify the economy. The sale took place last week and was a massive success, with the $12 billion share sale selling out shortly after the deal opened. The deal involved approximately 1.545 billion Aramco shares, or about 0.64% of the company, within the price range of 26.70 riyals to 29 riyals. Share buyers are now looking forward to a potential $124 billion annual payout, which Bloomberg Intelligence estimates will provide a dividend yield of 6.6%.
Who Bought the Shares?
The specifics of the split between local and foreign shareholders have not yet been revealed. However, industry experts are eagerly awaiting this information to gauge foreign interest in Aramco's assets. Foreign investors largely did not participate in the company's 2019 initial public offering (IPO), due to concerns about the high valuation of the shares. Aramco's stock has dropped 14% this year, valuing the company at $1.8 trillion with daily production estimated at 9.3 million barrels of oil equivalent.
Impact of Oil Prices
The share sale comes at a time when oil prices remain low, primarily due to concerns about weak global demand. This is a significant setback for Saudi Arabia, as the IMF estimates that Riyadh requires an average oil price of $96.20 a barrel to balance its budget, assuming it maintains steady crude output near 9.3 million barrels a day this year.
Saudi Arabia's Non-Oil Revenue
Fortunately for Saudi Arabia, low oil prices will not affect the economy nearly as much as they did a decade ago. In recent years, the largest economy in the Arab world has sought to diversify in a bid to cushion itself against wild oil price swings. Three years ago, Saudi Arabia's Crown Prince Mohammed bin Salman unveiled Saudi Vision 2030, the Kingdom’s roadmap for economic diversification, global engagement, and enhanced quality of life. This vision is already bearing fruit: Saudi Arabia’s Ministry of Economy and Planning has revealed that non-oil revenues hit 50% of the Kingdom's gross domestic product in 2023, the highest level ever.
Looking Ahead
Saudi Arabia has set a target to develop approximately 60 GW of renewable energy capacity by 2030, a significant increase from the current capacity of 2.8 GW. However, Saudi Arabia has no plans to abandon its legacy fossil fuel business any time soon. Saudi Aramco has unveiled plans to reach net-zero by 2050 without sacrificing oil and gas production. The company believes its tech breakthroughs have the potential to cut carbon emissions from each barrel of oil it produces by 15% by 2035, equivalent to 51.1 million tons of carbon a year.
Final Thoughts
The successful share sale by Saudi Aramco is a significant event in the global energy market. It not only showcases the strength and appeal of the company but also highlights the ongoing efforts of Saudi Arabia to diversify its economy and reduce its dependence on oil. What are your thoughts on this development? Do share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is everyday at 6pm.
