Saudi Aramco has unveiled its initial public offering (IPO), outlining key material risks that could adversely affect the company's activities or financial position.
Aramco is the world's largest oil producer, pumping 10% of global supply and is also the world's most profitable.
The decline in oil prices caused the company's net profit for the first half of the year fell 12% to $ 46.9 billion, but the number remains much higher than achieved by Apple, the world's most profitable listed company, which made $ 31.5 billion.
Following are the main risks, according to the prospectus issued late Saturday:
Processes
Operations may be affected by global oil prices, oil supply and demand, economic and geopolitical developments that may affect global trade, as well as the impact of climate change on oil and gas demand and prices.
- The Saudi government sets the ceiling for the kingdom's oil production, and the state finances are closely linked to the oil and gas industry.
- Aramco's operations may be influenced by decisions regarding production levels made by the Kingdom as a member of the Organization of Petroleum Exporting Countries (OPEC), or by the decisions of other producing countries.
- The Saudi government may commission Aramco to undertake projects or assist in initiatives outside its core business.
- Aramco's financial position may be adversely affected if the kingdom cancels its dollar peg.
Insurance
Aramco's insurance does not cover all risks, and may not protect it against obligations arising from potential events such as major oil spills, environmental disasters, terrorist attacks or acts of war.
Litigation
Aramco has already faced major lawsuits, including allegations of violations of antitrust laws partly linked to the kingdom's membership in OPEC.
Monopoly lawsuits linked to OPEC membership were dropped thanks to the protection afforded by US law on sovereign business, but there is no guarantee that the company will successfully protect those defenses in the future.
Terrorism and Conflict
- Political and social instability and actual and potential armed unrest and conflict in the Middle East, North Africa and other regions may affect Aramco's operations and financial position.
- Terrorism and armed conflict may have a fundamental and adverse impact on the market price of their shares.
Subtraction
- The IPO is expected to be the largest on the local bourse whose platform has been updated to accommodate exceptionally large trading volumes, but changes to trading mechanisms and procedures have not been tested, and there are no guarantees that they will facilitate listing properly.
- Unqualified foreign subscribers will not retain legal ownership of the offering shares, and will not be able to vote for shares in which they enjoy economic benefits.
- All stock purchases and sales on the local stock exchange will be denominated in local currency.
- There are no guarantees for the ability of foreign investors to raise the riyal with the necessary amounts to buy the size of the shares they wish to buy or exchange.
- The Saudi government will retain a controlling stake after the IPO and will be able to impose control on matters requiring shareholder approval.
- The Saudi government will veto any shareholder action or approval requiring a majority vote.
- Aramco can change its dividend policy without prior notice to minority shareholders, and the over 600-page prospectus has no details of how much the company will list overall or any commitments from major investors.
Sources said the company could sell between 1 and 2 percent of the Saudi stock market in what could become the world's largest listing.
The IPO for institutional investors will begin on November 17 and expire on December 4, while individual investors will be able to subscribe for shares from November 17 to 28, the bulletin said.
Saudi Aramco's facilities were targeted on September 14 with unprecedented attacks that temporarily halted 5.7 million barrels per day (bpd) of production, more than 5 percent of the world's oil supply.