Saudi Aramco hires Moelis for historic two trillion dollar flotation

Saudi Aramco is responsible for one-ninth of the world's oil supply (Source: Tom Hanley/Alamy)

Story by The Telegraph
Written by Tim Wallace 

Oil titan Saudi Aramco has reportedly hired investment bank Moelis to work on its stock market flotation, which is set to be the biggest listing in history.

The appointment, which was reported by the Financial Times, is a major coup for New York-based boutique Moelis, which was founded just a decade ago.

It had to fight off stiff competition as dealmakers from around the world were all drawn to the prospect of working on the historic deal.

The appointment also shows that Saudi Aramco is making progress in its preparations for the float.

Government officials hope that the sale of a stake in Saudi Arabia’s national oil company will achieve a valuation of around $2 trillion (£1.6 trillion).

The initial public offering represents an important step in transforming the country’s economic structure, and is expected to pave the way for a wider shakeup of its energy strategy and investment plans.

The country has a plan, called Saudi Vision 2030, to reduce its dependence on oil revenues in the coming years.

One factor driving that strategy is the fall in oil prices in recent years. The price per barrel fell from more than $110 in mid-2014 to below $30 a year ago, before rising back to $55 per barrel currently.

Such large swings have serious implications for the kingdom’s finances, as do technological developments moving the world away from oil consumption and onto renewable and other sources of energy.

Saudi Aramco itself is responsible for one-ninth of the world’s entire oil supply, pumping more than 10m barrels of oil per day.

The company claims proven oil reserves amounting to 261.1 billion barrels, as well as 297.6 trillion cubic feet of natural gas reserves. It employs 61,000 staff around the world.

The shares will be listed in Riyadh, but the internal Saudi stock market is too small to absorb the flotation of such an enormous company.

As a result the company is also planning to list its shares in London, New York and Hong Kong  to gain better access to investors and traders from around the world.