Aramco share sale ‘overbooked’ as oil giant looks to raise over $10bn

Saudi Arabia’s sale of shares in oil giant Aramco drew more demand than the stock on offer within hours of kicking off on Sunday, a deal that could raise up to $13.1bn in a major test of international appetite for the kingdom’s assets.

The banks on the deal will take institutional orders through Thursday and will price the shares the following day, with trading expected to start next Sunday on Riyadh’s Saudi Exchange.

The offering will be a gauge of Riyadh’s appeal to foreign investors, a key plank of the kingdom’s plan to overhaul its economy. Foreign direct investment has repeatedly missed its targets.

The sovereign wealth fund, the Public Investment Fund (PIF), the preferred vehicle driving the mammoth agenda that has poured tens of billions of dollars into everything from sports to futuristic desert cities, is likely to be a beneficiary of the funds, analysts and sources have said.

Aramco‘s shares closed about 2 per cent lower on Sunday at SAR28.45 ($7.53).

Saudi Arabia is offering investors about 1.545 billion Aramco shares, or 0.64 per cent, at SAR26.7 to SAR29, or just under $12bn at the top end of the range.

“Books are covered on the full deal size within the price range,” meaning indicated demand exceeded the deal size, one of the banks on the deal said in an update to investors reviewed by Reuters.

The banks can increase the offering by a further roughly $1bn. If all the shares are sold, the Saudi government will be cutting its stake in the world’s top oil exporter by 0.7 per cent.

Top financial institutions managing Aramco stake sale

The world’s top investment banks are helping to manage the sale – Citi, Goldman Sachs, HSBC, JPMorgan, Bank of America and Morgan Stanley – along with local firms Saudi National Bank, Al Rajhi Capital, Riyad Capital and Saudi Fransi.

M Klein and Company and Moelis are independent financial advisers for the deal.

UBS Group’s Credit Suisse Saudi Arabia unit alongside BNP Paribas, Bank of China International and China International Capital Corporation are also helping to seek buyers for the shares, according to a stock exchange filing on Sunday.

About 10 per cent of the new offering will be reserved for retail investors, subject to demand.

The deal kicked off on the same day the OPEC+ group of oil producers met, agreeing to extend most of its deep oil output cuts well into 2025, as the group seeks to shore up the market amid tepid global demand growth, high interest rates and rising rival US production. Some OPEC+ ministers met in Riyadh, while others joined meetings online.

The OPEC+ grouping had been cutting output by a total of 5.86 million barrels per day (mbpd), equal to about 5.7 per cent of global demand.

Read: OPEC+ extends deep oil production cuts into 2025

Still, Aramco has boosted its dividends, introducing a new performance-linked payout mechanism last year, despite lower profits as a result of the lower volumes.

Saudi Arabia is producing about 9 mbpd of crude, roughly 75 per cent of its maximum capacity.

The Saudi government directly holds just over 82 per cent of Aramco. PIF owns 16 per cent – 12 per cent directly and 4 per cent through subsidiary Sanabil, with the remainder held by public investors.