State oil
giant Saudi Aramco [IPO-ARMO.SE] has tasked two U.S. industry leaders in oil
reserves auditing to review the content of its deposits as it pushes ahead with
a
share listing next year, industry sources said on Thursday.
Aramco, whose
fields are estimated to contain 15 percent of the world's oil, has asked a unit
of oil services firm Baker Hughes - Gaffney, Cline and Associates - to carry
out the review, three sources familiar with the move told Reuters.
Two separate
sources said Aramco had also asked Dallas-based DeGolyer and MacNaughton, one
of the world's oldest names in reserves auditing, to perform some work.
Baker Hughes
and Aramco declined to comment. DeGolyer did not immediately respond to a
request for comment.
The listing,
expected to be the world's biggest initial public offering (IPO), is a
centerpiece of a Saudi Arabian government plan to transform the kingdom by
enticing investment and diversifying the economy away from a reliance on oil.
Aramco, once
U.S.-based and run by Americans, has long been a Saudi state corporation. It
dwarfs all others in the industry by production and reserves, with crude
reserves of 265 billion barrels.
The plan to
list Aramco, the kingdom's crown jewel, is being championed by Deputy Crown
Prince Mohammed bin Salman, who oversees energy and economic policy in the
world's top oil-exporting nation.
He is leading
a reform drive, called Vision 2030, to address falling oil revenue and fiscal
deficits by boosting the private sector, ending government waste and diversifying
the economy.
Last year,
Prince Mohammed said he expected the IPO would value Aramco at a minimum of $2
trillion, but that he thought the figure might end up higher.
Any valuation
would account for oil price expectations and the size of Saudi Arabia's proven
crude reserves.
Industry
sources say the right to own the reserves is a sovereign issue retained by the
Saudi government, while Aramco is most likely to keep its concession, meaning
it would have direct access to those reserves with sole rights of exploration
and production.
The main
question is how much of the oil reserves would be reflected in Aramco's
financial books after an independent audit as a result of the concession, the
sources say.
"Aramco
is in talks with a company to audit its reserves and another one to audit its
finances," another Saudi-based industry source said.
"Whether
(all) the oil reserves would be IPO-ed or not, that's still being
discussed."
The Wall
Street Journal was first to report that Aramco had hired Gaffney, Cline &
Associates to assess its oil reserves, citing sources.
MILESTONES
Saudi
officials and their advisers are aiming for two key milestones in 2017 as they
push ahead with the flotation.
Saudi-based
industry sources say 2018 remains the planned date and up to 5 percent is the
stake size being considered for the offer, though this could be raised
depending on oil prices and market reaction to the listing.
"There
are two key milestones this year. Choosing banks for the IPO and choosing an
exchange," said a senior industry source familiar with the IPO plans.
"Aramco
is looking at all options – ranging from North America, Europe and Asia. In
terms of deadlines, 2018 is still the plan to list the company."
Aramco had
said it was considering several options for the flotation, including a single
domestic stock exchange listing and a dual listing with a foreign market.
Officials from
the oil firm plan "discovery trips" to foreign exchanges in the next
few months and have invited banks to pitch for an advisory position in the IPO,
the sources said.
Morgan Stanley
and HSBC are among the banks that have received a request for proposals. The
invitation was to evaluate Aramco's business and help it with measures surrounding
the share sale.
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