LONDON/RIYADH (Reuters) - Saudi Arabia has called off plans for the domestic and international listing of state oil giant Aramco, billed as the biggest stock flotation in history, four senior industry sources said on Wednesday.

Financial advisers working on the planned listing have been disbanded as Saudi Arabia shifts its attention to a proposed acquisition of a “strategic stake” in local petrochemicals maker Saudi Basic Industries Corp, two of the sources said. [nL8N1UE4VF]

“The decision to call off the IPO was taken some time ago, but no-one can disclose this, so statements are gradually going that way - first delay then calling off,” a Saudi source familiar with the IPO plans said.

“The message we have been given is that the IPO has been called off for the foreseeable future,” said a second source, a senior financial adviser.

“Even the local float on the Tadawul Stock Exchange has been shelved,” that person said.

Related Coverage Saudi energy minister denies Aramco IPO will be called off

Early on Thursday, Saudi Arabia’s energy minister issued a denial that the IPO had been called off.

“The government remains committed to the initial public offering of Saudi Aramco, in accordance with the appropriate circumstances and appropriate time chosen by the Government,” Khalid al-Falih said in a statement.

Falih said Riyadh had taken measures to prepare for the listing and the timing would depend on factors including favorable market conditions.

The proposed listing of the national champion was a central part of Crown Prince Mohammed bin Salman’s reform drive aimed at restructuring the kingdom’s economy and reducing its dependence on oil revenue.

The prince announced the plan to sell about 5 percent of Aramco in 2016 via a local and an international listing, predicting the sale would value the whole company at $2 trillion or more. Several industry experts questioned whether a valuation that high was realistic, which hindered the process of preparing the IPO for the advisors.

FILE PHOT: An Aramco employee walks near an oil tank at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. Picture taken May 21, 2018. REUTERS/Ahmed Jadallah/File Photo

A third industry source said the IPO had been called off for the time being but that it could be revived in future, if appropriate.

“It has been postponed until further notice,” the source said.

Stock exchanges in financial centers including London, New York and Hong Kong have been vying to host the international tranche of the share sale.

An army of bankers and lawyers have competed to win advisory roles in the IPO, seen as a gateway to a host of other deals they expect to flow from the kingdom’s wide privatization program.

International banks JPMorgan, Morgan Stanley and HSBC, were working as global coordinators, boutique investment banks Moelis & Co and Evercore were chosen as independent advisers and law firm White & Case as legal adviser, sources had previously told Reuters.

More banks were expected to be named but no bookrunners were formally appointed despite banks pitching for the deal.

Slideshow (2 Images)

Lawyers, bankers and auditors are all essential in the drafting the prospectus, a formal document that provides essential details on the company.

Aramco had a budget which it used to pay advisers until the end of June. This has not been renewed, one of sources said.

“The advisers have been put on standby,” a fourth source, a senior oil industry official, said.

Sources have previously told Reuters that in addition to the valuations, disagreements among Saudi officials and their advisers over which international listing venue to be chosen had slowed the IPO preparations.</s>Saudi Arabia has called off both the domestic and international stock listing of state oil giant Aramco, billed as the biggest such deal in history, four senior industry sources said Wednesday.

The financial advisors working on the proposed listing have been disbanded, as Saudi Arabia shifts its attention to a proposed acquisition of a "strategic stake" in local petrochemicals maker Saudi Basic Industries Corp, two of the sources said.

"The decision to call off the IPO was taken some time ago, but no-one can disclose this, so statements are gradually going that way - first delay then calling off," a Saudi source familiar with IPO plans.

Saudi Aramco did not immediately respond to an emailed request for comment. The Saudi Royal Court had no immediate comment.

The proposed listing of the national champion was a central part of Crown Prince Mohammed bin Salman's reform drive aimed at restructuring the kingdom's economy and reducing its dependence on oil revenue.

The prince announced the plan to sell about 5 percent of Aramco in 2016 via a local and an international listing, predicting the sale would value the whole company at $2 trillion or more. Several industry experts however questioned whether a valuation that high was realistic, which hindered the process of preparing the IPO for the advisors.

Stock exchanges in financial centers including London, New York and Hong Kong had been vying to host the international tranche of the share sale.

An army of bankers and lawyers started to fiercely compete to win advisory roles in the IPO, seen as a gateway to a host of other deals they expected to flow from the kingdom's wide privatization program.

International banks JPMorgan, Morgan Stanley and HSBC, were working as global coordinators, boutique investment banks Moelis & Co and Evercore were chosen as independent advisors and law firm White & Case as legal adviser, sources had previously told Reuters.

More banks were expected to be named but no book runners were formally appointed despite banks pitching for the deal.

Lawyers, bankers and auditors are all essential in the drafting the prospectus, a formal document that provides essential details on the company.

"The message we have been given is that the IPO has been called off for the foreseeable future," said one of the sources, a senior financial advisor.

"Even the local float on the Tadawul Stock Exchange has been shelved," the source added.

Saudi energy minister and Aramco chairman Khalid Al Falih said in the company's 2017 annual report, released in August, that Aramco "continued to prepare itself for the listing of its shares, a landmark event the company and its board anticipate with excitement."

Aramco had a budget which it used to pay advisors until the end of June. This has not been renewed, one of sources said.

"The advisors have been put on standby," a third source, a senior oil industry official said.

"The IPO has not been officially called off, but the likelihood of it not happening at all is greater than it being on."

Sources have previously told Reuters that in addition to the valuations, disagreements among Saudi officials and their advisers over which international listing venue to be chosen had slowed down the IPO preparations.</s>CAIRO (Reuters) - Saudi Arabia’s energy minister denied a Reuters report that state oil giant Aramco’s initial public offering will be called off, in a statement issued early on Thursday.

“The government remains committed to the initial public offering of Saudi Aramco, in accordance with the appropriate circumstances and appropriate time chosen by the Government,” Energy Minister Khalid al-Falih said in a statement released on Saudi Press Agency.

Reuters reported on Wednesday that four senior industry sources said Saudi Arabia has called off both the domestic and international stock listing of Aramco. [nL8N1VD4VP}</s>"The message we have been given is that the IPO has been called off for the foreseeable future," a senior financial adviser told Reuters. "Even the local float on the Tadawul Stock Exchange has been shelved."

"The decision to call off the IPO was taken some time ago, but no-one can disclose this, so statements are gradually going that way — first delay then calling off," a Saudi source familiar with the IPO plan told Reuters.

Doubt has surrounded the initial public offering (IPO) for months. Essential questions about the offer, such as which markets and which banks will get to take part in the debut, have continually been deferred. In March, the Wall Street Journal reported that Aramco's international offering was being postponed and that the IPO would initially only happen on the domestic Tadawul Stock Exchange in Riyadh.

Headquartered in the Persian Gulf port of Dhahran, Saudi Aramco produces 10 percent of the world's crude oil, according to the Economic Times, and was billed by Bloomberg earlier this year as the "world's most profitable company." It was founded by American investors in 1933 as the California-Arabian Standard Oil company, which the newly formed Saudi monarchy slowly exerted increasing pressure on, acquiring bits and pieces until it totally owned the company by 1980.

However, earlier this month, Saudi Energy Minister and Aramco chairman Khalid al-Falih said in the company's 2017 annual report that Aramco "continued to prepare itself for the listing of its shares, a landmark event the company and its board anticipate with excitement."

The IPO has figured in Crown Prince Mohammed bin Salman's vision of Saudi Arabia's future since his first interview with international press in January 2016. The cornerstone of Salman's modernization of the country will be the Public Investment Fund (PIF), a sovereign wealth fund, which functions essentially like a national savings account. Salman's plans to attract foreign investment were grounded in a strong PIF, which was itself to be heavily funded by Aramco's public offering, expected to raise at least $100 billion by itself even though it was to have been for only 5 percent of the company. Right now, the PIF has about $250 billion in it out of a promised $2 to $3 trillion.

Without a public Aramco bringing in the dough, the PIF — and the credibility of Salman's economic vision — remain up in the air. Forbes journalist Ellen R. Wald, who is also author of the book "Saudi, Inc.," has suggested that Salman's plans were mostly hot air anyway, noting that "in truth, Saudi Arabia's economic future does not and never did depend on an Aramco IPO. However, the king and his son portrayed a public listing of Aramco as a key aspect of Saudi Arabia's economic future," which means the end of the IPO will appear far worse than it really is.

Why pull the public offering, though? One theory floated by Forbes is that because it has been state-owned since 1980, Aramco is "the one major oil company that is not beholden to short-term financials," meaning it can "can continue to look to the long-term" instead of seeking to please shareholders with immediate returns. That gives it much more confidence investing in oil field exploration and efficiency improvement of its current assets.

July 20, Aramco CEO Amin Nasser noted in an interview with Al-Arabiya television that Aramco was looking at acquiring a stake in the Saudi Basic Industries Corp, a publicly traded petrochemical company, as part of its plans to diversify assets beyond petroleum production. Financial advisers told Reuters Wednesday that the PIF may be about to sell off about $70 billion in assets from SABIC to patch up funding from the Aramco IPO falling through.

Forbes noted that Aramco not going public won't affect oil prices, which have been steadily rising for weeks amid expectations of lower supply due to looming US sanctions on Iranian oil products, and that the IPO was never expected to have a significant impact on Saudi Arabia's oil production.</s>"The government remains committed to the initial public offering of Saudi Aramco, in accordance with the appropriate circumstances and appropriate time chosen by the Government", Energy Minister Khalid al-Falih said in a statement released on Saudi Press Agency.

Reuters reported on Wednesday that four senior industry sources said Saudi Arabia has called off both the domestic and international stock listing of Aramco.</s>Reuters is now reporting that Saudi Arabia’s plans for an initial public offering of the Saudi oil giant, Aramco, are cancelled and the financial advisors have been dismissed. These reports have not been officially confirmed by the Saudi government or by Aramco. For a look at what a cancellation of the IPO would means for the Saudi monarchy, see my previous piece, here.

And below let’s look at the implications for oil markets and the oil industry.

In the short term, news that Aramco won’t be going public has little to no impact on oil prices . Oil prices are facing upward pressure as demand remains strong, production growth in the United States is expected to stagnate and oil exports from Iran come off the market in preparation for new U.S. sanctions that will take effect in November. The Aramco IPO was never expected to have a significant impact on Saudi Arabia’s oil production.

There were some industry analysts who believed that Saudi Arabia would cut oil production to push up the price of oil just prior to Aramco’s initial public offering. However, there was never any confirmation of this strategy, and the Saudi oil ministry has always set oil production levels according to market forces.

When it comes to the long-term future of the oil industry, the implications are more important. If Aramco does not go public and the company maintains its independence from the Saudi government—as it has for almost 40 years—it will continue to benefit as the one major oil company that is not beholden to short-term financials.

The other major comparable oil companies are all publicly traded international oil companies (IOCs) and thus concerned about shareholder sentiment. They see a need to increase profit, even short-term profit, to keep their stock prices high. When oil prices were very high, as they were for the first decade of the 21stcentury, oil profits were so outrageous that the companies continued to invest freely in the future. For the last few years, with depressed oil prices, and even today, with crude oil prices around $70 per barrel, IOCs like , and have been hesitant to invest like they once had. In fact, Shell has made a point of divesting from upstream oil assets both to bolster profit and as a move to promote its commitment to alternative energies.

Conversely, an independent Aramco that can continue to look to the long-term, as it has since Saudi Arabia first took full ownership of the company in 1980, would be much less concerned about short-term profits. Aramco has vastly superior upstream assets to any other company, but it still lags in downstream. The company is working to expand its investment in refining and petrochemicals. It also has an extensive research and development arm that expands into parallel industries. In addition, Aramco is also putting significant resources into exploring for new oil fields as well as innovation to improve efficiency and the health of its current fields. One could even imagine a time in the long-term future in which Aramco buys oil and gas fields outside of Saudi Arabia, if the behavior of Aramco continues to diverge from that of its major competitors.

If Aramco does not go public now or in the near future, industry watchers will have to keep an eye on how the one private major oil company continues to invest and expand as the others seemingly focus on their next earnings call.</s>Saudi Arabia’s state-owned oil giant has suspended its plans to go public, a decision that puts on hold what would have been by far the biggest initial offering on record — or perhaps signals its cancellation.

The company, Saudi Arabian Oil Co., and its advisers are instead focusing on buying a stake in SABIC, a huge Saudi chemical producer, people briefed on the matter said Wednesday, speaking on the condition of anonymity because the discussions were private. The shift in focus to a deal for SABIC, one of the people added, means that the earliest work could resume on a Saudi Aramco stock sale will be late next year.

The delay cast more doubt on the future of what is meant to be not just a landmark deal for financial markets but one of the biggest milestones in Saudi Arabia’s history.

The kingdom’s de facto ruler, Crown Prince Mohammed bin Salman, had hoped to use the billions of dollars the IPO would raise to finance his Vision 2030 plan, an ambitious effort to wean his country off its dependence on oil. Among the plan’s expensive elements is the creation of a $500 billion city called Neom, meant to run entirely on clean energy and be serviced by robots.

An IPO of Saudi Aramco — which would sell shares on its home Tadawul exchange and another major international stock market — would mean a gusher of fees for all the advisers involved, including the banks and law firms on retainer. Stock exchanges around the world, from New York to London to Tokyo, have sought the prestige of hosting what would be a seminal event for the financial markets. World leaders, including President Donald Trump, have pitched their markets to Salman.

But the plans to take the state-owned oil monopoly public have been bedeviled by the sheer complexity of the undertaking. Though Salman had hoped for a $2 trillion market value for Saudi Aramco, oil industry experts called that too high. And legal advisers have grappled with potentially thorny issues, including the possible pitfalls that could arise from choosing a foreign exchange on which to offer shares.

In a statement, Khalid Al Falih, the Saudi energy minister and the company’s chairman, said the IPO had not been called off.

“The government remains committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum,” he said. “This timing will depend on multiple factors, including favorable market conditions.”

The statement also suggested that an important acquisition would come first.

Last month, Saudi Aramco confirmed that it was in talks with the Saudi government’s sovereign wealth fund, which owns a 70 percent stake in SABIC, to buy a “strategic interest” in the chemical company.

Buying a part of SABIC, a giant in its own right, could make Saudi Aramco a more valuable company while the petrochemical industry is growing around the world. That, in turn, could help the oil company draw even more interest in a public offering.

SABIC, which earned a net profit of nearly $5 billion in 2017, produced more than 70 million tons of petrochemicals and 5 million tons of steel last year, according to Middle East Petroleum and Economic Publications, which tracks the industry.

Saudi Aramco has been trying to move into the sector, which it believes could provide a hedge against an eventual decline in demand for oil as a fuel. This month, Saudi Aramco’s board approved $14 billion in petrochemical projects and project expansions, including a large refinery in Texas and a joint venture with the French giant Total in Saudi Arabia.

The two companies have grown closer recently, including by starting plans for a joint chemicals plant in 2025. And SABIC would give Saudi Aramco invaluable expertise in the petrochemicals sector.

“Saudi Aramco has been quite deliberate in adding refineries, terminals and, more recently, chemical plants,” said Osmar Abib, a managing director at Credit Suisse who has been closely following the proposed public offering. “It is all with the key objectives of securing more access to markets and enhancing overall returns.”

Saudi Aramco’s buying a stake in SABIC would have another benefit for the Saudi government. A deal would still fill the coffers of the country’s sovereign wealth fund with billions of dollars, allowing it to make some of the Vision 2030 investments it had planned to fund with a public offering. The plan to delay the IPO was reported earlier by Reuters.

But skeptics of a SABIC transaction worry that Saudi Aramco would be taking on a financial burden by paying tens of billions of dollars for a stake in the chemical company. And adding on a big petrochemical business might reduce the overall profitability of Aramco, which is believed to enjoy among the world’s lowest costs for extracting the oil it produces.

In any case, any eventual listing of Saudi Aramco shares will now have to wait until the SABIC acquisition is completed.

But the decision to pause planning for a public offering of Saudi Aramco — and the pivot toward the transaction with SABIC — prompted some analysts to suggest that a public listing may be doomed.

Jim Krane, an energy expert at Rice University, said he still suspected Salman “dreams of a diversified Saudi economy.”

“Aramco is still likely to play a big role in this goal, but Aramco might not do this through an IPO,” he said. “There are certainly other ways to raise capital.”

This article originally appeared in The New York Times.

Michael J. de la Merced and Clifford Krauss © 2018 The New York Times</s>Saudi Arabia has called off both the domestic and international stock listing of state oil giant Aramco, billed as the biggest such deal in history, four senior industry sources said on Wednesday.

LONDON/RIYADH: Saudi Arabia has called off both the domestic and international stock listing of state oil giant Aramco, billed as the biggest such deal in history, four senior industry sources said on Wednesday.

The financial advisors working on the proposed listing have been disbanded, as Saudi Arabia shifts its attention to a proposed acquisition of a "strategic stake" in local petrochemicals maker Saudi Basic Industries Corp , two of the sources said.

"The decision to call off the IPO was taken some time ago, but no-one can disclose this, so statements are gradually going that way - first delay then calling off," a Saudi source familiar with IPO plans.

Saudi Aramco did not immediately respond to an emailed request for comment. The Saudi Royal Court had no immediate comment.</s>State-owned oil giant Saudi Aramco has denied reports it has axed plans to float 5 per cent of its business in a $1.6trillion deal.

On Wednesday, Reuters reported that Saudi Aramco had cancelled its partial flotation plans to focus on a proposed acquisition of a stake in a local petrochemicals maker.

But, Khalid al-Falih, Saudi Aramco's chairman and Saudi Arabia energy minister, said: 'The government remains committed to the initial public offering of Saudi Aramco at a time of its own choosing when conditions are optimum.'

He added: 'The timing will depend on multiple factors, including favourable market conditions, and a downstream acquisition which the company will pursue in the next few months, as directed by its board of directors.'

Michael Hewson, chief market analyst at CMC Markets UK, said: 'Today’s news that the Saudi Aramco IPO has been put back hasn’t come as too much of a surprise given the difficulties that the float has encountered in gaining an overseas listing.

'Even without the difficulties of a 5 per cent stake being below the free float requirement for London and concerns about litigation in New York, the valuation of $2trn was on the rich side given that any prospective shareholder would have absolutely no say in the corporate governance of the company.

'This IPO looks dead in the water from an international point of view, whatever the Saudis would have us believe publicly.'

The flotation was originally expected to take place in the second-half of this year, but in March, Mr al-Falih delayed the IPO to the second quarter of 2019.

London is among several major financial centres hoping to host the potential flotation, along with New York and Hong Kong.

City regulators had gone to great lengths to lure Saudi Aramco to London for the flotation, and courted controversy along the way.

Prime Minister Theresa May personally lobbied Saudi oil minister Khalid al-Falih last April, while the Government also enlisted former Lazard chairman and investment banking guru Sir Ken Costa to try and make it happen.

The Financial Conduct Authority went as far as to create a new category that allows sovereign-controlled companies to sidestep some of the requirements for premium listings on the London Stock Exchange.

The regulator's attempt to cater to big state-owned businesses drew criticism from industry groups, including the Institute of Directors.

In the US, President Trump made a public pitch for the business in November last year, saying on Twitter: ‘Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!’

But, London was thought to have an edge over New York because of concerns the US was more litigious and the prospect of lawsuits over the 9/11 terror attacks.</s>"The government remains committed to the initial public offering of Saudi Aramco, in accordance with the appropriate circumstances and appropriate time chosen by the Government, Energy Minister Khalid al-Falih said in a statement released on Saudi Press Agency.

[CAIRO] Saudi Arabia's energy minister denied a Reuters report that state oil giant Aramco's initial public offering will be called off, in a statement issued early on Thursday.

"The government remains committed to the initial public offering of Saudi Aramco, in accordance with the appropriate circumstances and appropriate time chosen by the Government, Energy Minister Khalid al-Falih said in a statement released on Saudi Press Agency.

Reuters reported on Wednesday that four senior industry sources said Saudi Arabia had called off both the domestic and international stock listing of Aramco, billed as the biggest such deal in history.

Stock exchanges in financial centres including London, New York and Hong Kong had been vying to host the international tranche of the share sale.

The proposed listing of the national champion was a central part of Crown Prince Mohammed bin Salman’s reform drive aimed at restructuring the kingdom’s economy and reducing its dependence on oil revenue.

The prince announced the plan to sell about 5 per cent of Aramco in 2016 via a local and an international listing, predicting the sale would value the whole company at US$2 trillion or more. Several industry experts however questioned whether a valuation that high was realistic, which hindered the process of preparing the IPO for the advisors.

An army of bankers and lawyers started to fiercely compete to win advisory roles in the IPO, seen as a gateway to a host of other deals they expected to flow from the kingdom’s wide privatisation programme.

International banks JPMorgan, Morgan Stanley and HSBC, were working as global coordinators, boutique investment banks Moelis & Co and Evercore were chosen as independent advisors and law firm White & Case as legal adviser, sources had previously told Reuters.

More banks were expected to be named but no bookrunners were formally appointed despite banks pitching for the deal.

Lawyers, bankers and auditors are all essential in the drafting the prospectus, a formal document that provides essential details on the company.

“The message we have been given is that the IPO has been called off for the foreseeable future,” one of the sources, a senior financial advisor, told Reuters earlier.

“Even the local float on the Tadawul Stock Exchange has been shelved,” the source added.

Sources had previously told Reuters that in addition to the valuations, disagreements among Saudi officials and their advisers over which international listing venue to be chosen had slowed down the IPO preparations.
Senior industry sources say that the previously announced initial public offering of Saudi Aramco has been halted.