Aramco seeks to follow Adnoc’s lead raising cash from asset deals

Saudi Arabia's state producer has hired Moelis to advise on its strategy

Mandatory Credit: Photo by ALI HAIDER/EPA-EFE/Shutterstock (10524331t)
Visitors and exhibitors gather at the Saudi Aramco section in the exhibition of the World Future Energy Summit 2020 (WFES) in Abu Dhabi, United Arab Emirates, 13 January 2020.
World Future Energy Summit in Abu Dhabi, United Arab Emirates - 13 Jan 2020

Saudi Arabia is looking to emulate neighbouring Abu Dhabi by using its state energy firm to raise billions of dollars from investors.

Saudi Aramco, the world's biggest oil company, has hired Moelis & Co to devise a strategy for selling stakes in some subsidiaries, according to people familiar with the matter.

The plan includes raising around $10 billion from a stake sale in Aramco’s pipelines, said the people, who asked not to be identified because the matter is private. Moelis and Aramco declined to comment.

Oil-producing Gulf Arab economies have accelerated efforts to attract investment. Abu National Oil Company raised more than $15 billion this year from the likes of Apollo Global Management, Brookfield Asset Management and Singapore's sovereign wealth fund.

Adnoc, which pumps almost all of the oil in the United Arab Emirates, Opec’s third-biggest producer, has sold shares in its fuel-retail arm and leasing rights for properties and natural-gas pipelines. This has been part of its transformation strategy since 2016, making Adnoc a more commercially-focused and technology-enabled organisation.

Many bankers have said this is a quicker way of raising cash than Aramco’s initial public offering in December 2019, which raised almost $30 billion for the kingdom but took around two years to complete.

While the Dhahran-based firm issued $8 billion of bonds last month to fund the world’s biggest dividend, its executives have said they want to lower the company’s leverage following its $69 billion acquisition of chemical marker Saudi Basic Industries Corp this year. The energy firm has lined up banks including JP Morgan Chase & Co to help with a stake sale in the pipeline business, Bloomberg News reported in April.

Aramco in August reshuffled its senior management team and created a division focused on “portfolio optimisation” to look at the company’s existing assets as it adjusts to weaker energy prices.

Moelis was among the banks that arranged Aramco’s IPO. Its founder, Ken Moelis, has extensive experience of deal-making in the region.