Saudi Aramco takes tentative steps on IPO disclosure path

Saudi Aramco has taken some small steps toward its IPO but still has a big gap to fill in financial disclosure.

Saudi Aramco is preparing its annual review including selected operational statistics, which typically are released in May or June, although potential investors should not expect anything beyond the limited information usually contained in those brochures, which do not include any financial information.

“The [annual review] is being tweaked with an eye to the IPO, but only in the sense of being ‘lawyered’ for anything forward-looking,” said a person involved in their preparation, referring to the restrictions on public companies from making predictions about their future performance.

Aramco’s annual reports are closely perused for any clues about strategic aims and they give interesting titbits on things like upstream oil and gas output, as well as domestic and foreign refinery and petrochemical ­volumes.

But a listing on a major exchange is being planned – alongside a domestic IPO – which would usually require Aramco to produce a set of accounts as well as a comprehensive prospectus.

To list shares on the New York Stock Exchange, for example, would typically require audited annual financial statements covering multiple years and unaudited financial statements for at least five years. It also requires separate audited reports for acquired businesses, which would include Aramco’s deal completed earlier this year to buy out its joint venture refining partner in the US, Royal Dutch Shell, which made Aramco owner of the largest oil complex in the country.

Aramco has no culture of public disclosure and so the task of moving it toward a system to produce rigorous audited accounts is gargantuan, according to several people who have worked with the company.

Among the consultants Aramco is said to have hired are Ernst & Young and PricewaterhouseCoopers, two of the world’s top three financial audit firms.

Also, in the past few weeks ­Aramco is said to have hired a number of other key advisers, which it will need to prepare the listing, including FTI Consulting and Brunswick, the Washington DC- and London-headquartered companies, respectively, which vie for the top spots in financial public relations league tables.

FTI’s playbook for an NYSE IPO includes the following: “The IPO process will place the company under acute public scrutiny and set in motion a whirlwind of activity,” which necessitates “analysing and benchmarking how industry-leading and peer companies communicate to their financial audiences”.

Already, the chief executive of Total of France has said his company would be interested in taking an Aramco stake and Aramco’s board members were scheduled to have met last Wednesday in Shanghai to present information to senior executives from Chinese oil companies. Aramco has not yet confirmed even that it has hired any advisers (HSBC’s chief executive Stuart Gulliver’s statement to shareholders in Hong Kong two weeks ago remains the only public confirmation of a hire), nor given any indication of a timeline for its IPO, including when it might release financial information.

“You could say we’ve had the starting on the IPO in that a number of the advisers have been lined up but it’s a still a marathon from here,” said one of Aramco’s IPO team.

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