OPINION: Middle East energy giants are set for a rush of initial public offerings this year as oil prices trading at seven-year highs inch closer to the $100 per barrel mark.
As some oil companies approach record valuations — Saudi Aramco is valued at almost $2 trillion — the high oil price scenario presents an opportunity for the national oil companies to press ahead with their stake sale plans.
Aramco is reportedly looking at selling a stake of up to 2.5%, worth almost $50 billion, through a secondary listing on domestic and international exchanges, while Abu Dhabi National Oil Company (Adnoc) in September raised $1.1 billion by selling stakes in its drilling subsidiary.
Adnoc has listed a few of its subsidiaries in recent years on local bourses and is expected to further boost its offering this year with stakes in some more subsidiaries.
Raising money through IPOs is a winning strategy that the regional energy companies hope will remain resilient as the energy transition gathers pace.
Potential stake sales in core assets could de-risk their long-term balance sheets, raise capital for their ambitious capacity expansion plans and provide additional investment opportunities in low-carbon projects.
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With crude demand likely to peak by the middle of the decade, the region’s players are aiming to emerge as diversified energy giants, not exclusively focused on the oil and gas that has been their mainstay for decades.
As fears loom that some global oil and gas assets could be left stranded in a fast-tracked energy transition, the Middle East giants will not want to miss out on the opportunity to cash out on their prized assets when valuations are at record highs.
While Saudi Arabia and the United Arab Emirates are likely to lead regional stake sale efforts, it would be no surprise to see neighbours Kuwait, Oman and Bahrain join the IPO bandwagon if crude prices remain robust.
(This is an Upstream opinion article.)
