In a strategic move to bolster its finances, Saudi Arabia is preparing to release additional shares of its state-owned oil behemoth, Aramco, according to sources privy to the development. This action is set to fortify the nation’s push to diversify its economy beyond the oil sector.
Insiders indicate that financial titans Citigroup, Goldman Sachs, and HSBC have been appointed to manage the impending share sale, which is projected to occur in the latter half of the year. Reports suggest that this transaction might generate close to $20 billion.
The exact details of the sale are still under discussion and may be subject to change, with neither the government’s communication office nor Aramco currently commenting on the matter.
The capital raised is vital for Saudi Arabia’s ambitious Vision 2030 blueprint, which aims to reshape the country’s economic landscape by fostering a robust private sector and reducing dependency on oil revenue.
Despite projecting a budget shortfall of 79 billion riyals (approximately $21.07 billion) for 2024, which equates to around 2% of the nation’s GDP, some analysts anticipate an even greater deficit due to escalating expenditure demands.
The decision to offload more shares follows a recent directive that capped Aramco’s oil production ambitions, potentially allowing more funds to be redirected to the state’s coffers, as some financial experts have suggested.
To date this year, the kingdom has already secured $12 billion through debt markets to help cover its fiscal deficit.
Aramco has a history of substantial shareholder payouts, including nearly $10 billion in performance-linked dividends each quarter, in addition to Brent-linked royalties and consistent base dividends.
The company’s initial public offering (IPO) in late 2019 broke records as the largest to date, amassing $25.6 billion and later reaching a total of $29.4 billion through subsequent share sales.
Crown Prince Mohammed bin Salman, Saudi Arabia’s de facto leader, previously announced in 2021 that the proceeds from Aramco’s further share sales would reinforce the nation’s principal sovereign wealth fund.
The Saudi government, Aramco’s largest shareholder by a significant margin, owns 90.19% of the company, while the Public Investment Fund (PIF) and its subsidiary Sanabil hold 4% each.
Market observers are keenly awaiting Aramco’s full-year financial results for 2023, expected in March, which will likely include updates on its revised capital expenditures following the production capacity decision.