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Saudi Aramco Selects U.S. Firms To Audit Its Reserves For IPO


State oil giant Saudi Aramco has tasked two U.S. industry leaders in oil reserves auditing to review the content of its deposits as it pushes ahead with a share listing next year, industry sources said on Thursday.

Aramco, whose fields are estimated to contain 15 percent of the world’s oil, has asked a unit of oilservices firm Baker Hughes – Gaffney, Cline and Associates – to carry out the review, three sources familiar with the move told Reuters.

Two separate sources said Aramco had also asked Dallas-based DeGolyer and MacNaughton, one of the world’s oldest names in reserves auditing, to perform some work.

Baker Hughes and Aramco declined to comment. DeGolyer did not immediately respond to a request for comment.

The listing, expected to be the world’s biggest initial public offering (IPO), is a centrepiece of a Saudi Arabian government plan to transform the kingdom by enticing investment and diversifying the economy away from a reliance on oil.

Aramco, once U.S.-based and run by Americans, has long been a Saudi state corporation. It dwarfs all others in the industry by production and reserves, with crude reserves of 265 billion barrels.

The plan to list Aramco, the kingdom’s crown jewel, is being championed by Deputy Crown Prince Mohammed bin Salman, who oversees energy and economic policy in the world’s top oil-exporting nation.

He is leading a reform drive, called Vision 2030, to address falling oil revenue and fiscal deficits by boosting the private sector, ending government waste and diversifying the economy.

Last year, Prince Mohammed said he expected the IPO would value Aramco at a minimum of $2 trillion, but that he thought the figure might end up higher.

Any valuation would account for oil price expectations and the size of Saudi Arabia’s proven crude reserves.

Industry sources say the right to own the reserves is a sovereign issue retained by the Saudi government, while Aramco is most likely to keep its concession, meaning it would have direct access to those reserves with sole rights of exploration and production.

The main question is how much of the oil reserves would be reflected in Aramco’s financial books after an independent audit as a result of the concession, the sources say.

“Aramco is in talks with a company to audit its reserves and another one to audit its finances,” another Saudi-based industry source said.

“Whether (all) the oil reserves would be IPO-ed or not, that’s still being discussed.”

The Wall Street Journal was first to report that Aramco had hired Gaffney, Cline & Associates to assess its oil reserves, citing sources.


Saudi officials and their advisers are aiming for two key milestones in 2017 as they push ahead with the flotation.

Saudi-based industry sources say 2018 remains the planned date and up to 5 percent is the stake size being considered for the offer, though this could be raised depending on oil prices and market reaction to the listing.

“There are two key milestones this year. Choosing banks for the IPO and choosing an exchange,” said a senior industry source familiar with the IPO plans.

“Aramco is looking at all options – ranging from North America, Europe and Asia. In terms of deadlines, 2018 is still the plan to list the company.”

Aramco had said it was considering several options for the flotation, including a single domestic stock exchange listing and a dual listing with a foreign market.

Officials from the oil firm plan “discovery trips” to foreign exchanges in the next few months and have invited banks to pitch for an advisory position in the IPO, the sources said.

Morgan Stanley and HSBC are among the banks that have received a request for proposals. The invitation was to evaluate Aramco’s business and help it with measures surrounding the share sale.


15 Comments on "Saudi Aramco Selects U.S. Firms To Audit Its Reserves For IPO"

  1. joe on Fri, 27th Jan 2017 10:44 am 

    Selling shares to ‘diversify’ away from oil is a bit weird. First out, to get the Saudi economy away from ‘oil reliance’, means they need to have another industry, which will probobly, you guessed it, use oil (maybe they will produce less jihadis and more tulips who knows). So there is no getting off oil. Second the cash raised will go to the Al Saud family as they own Aramco directly. So its a lie that its for the Saudi ‘people’, when they say that they mean their direct family, thats Arab culture. The other tribes get loyalty stipends and cushy government jobs, migrants have no rights and will continue to be slaves, or close to slaves. So whats really going on? Maybe by encouraging investment they think they are shoring up international support for their evil 9-11 supporting regime. Who knows.

  2. onlooker on Fri, 27th Jan 2017 11:12 am 

    Sorry but this sounds fishy and all too convenient for US firms to audit Saudi. They would conspire to project a rosy situation in order to keep KSA a competitive oil producing nation especially in its competition with Russia and Iran.

  3. GregT on Fri, 27th Jan 2017 11:50 am 


  4. Cloggie on Fri, 27th Jan 2017 11:54 am 

    Selling shares to ‘diversify’ away from oil is a bit weird. First out, to get the Saudi economy away from ‘oil reliance’, means they need to have another industry, which will probobly, you guessed it, use oil (maybe they will produce less jihadis and more tulips who knows).

    Not really, these folks are smarter than that.

    an IPO of 5 percent of the company could generate more than $100 billion in revenue, which the prince plans on putting to good use developing other sectors of the economy.

    They need a whopping $50 billion for very ambitious solar and wind plans (and nuclear). Oil is for foreigners and their currency. Solar is very reliable in KSA.

    Excellent prescient thinking of these chaps.

  5. BobInget on Fri, 27th Jan 2017 12:57 pm 

    The ‘plan’ originally called for selling off 5%.
    Dis is the foist we hear giving the impression
    of flogging an entire liability.

    Note, even though KSA is still inflicting unspeakable violence on Yemen, it is Yemeni refugees banned from entering the US not the main financiers, Saudi Arabia.

  6. rockman on Fri, 27th Jan 2017 1:57 pm 

    Looked – “Sorry but this sounds fishy and all too convenient for US firms to audit Saudi.” According to rockdoc that firm has a good rep. And such firms live and die by the quality of their rep. Play loose and easy and the bankers create their own internal “correction factor” for a particular auditor…like their reserve number X 75%. Once you get a bad rep it’s very difficult to recover.

    But as I explained elsewhere the auditors will only have the data the Saudis give them. Data totally unverifiable. Something as simple as a map showing a field with 60 wells that produced X million bbls of oil. In reality 100 wells may have been drilled. And the production decline curves for each well may be completely fabrticated. Such base data is critical to estimating remaining recoverable reserves. And with no way to verify the data all the auditor can do is insert the standard disclaimer stating they are not responsible for erroneous interpretations based upon incorrect data.

  7. onlooker on Fri, 27th Jan 2017 2:23 pm 

    thanks for the explanation Rock.

  8. Plantagenet on Fri, 27th Jan 2017 5:24 pm 

    Its not just a matter of the auditors having a good reputation—its actually against the law to misrepresent the facts on a company’s assets when issuing an IPO.

    If Saudi misrepresents their oil reserves in the coming ARAMCO IPO, they will be in violation of US securities law. If the company auditing ARAMCO’s oil reserves misrepresents the amount of these reserves, they may also be liable to lawsuits and even to prosecution for violating SEC rules and regulations.


  9. onlooker on Fri, 27th Jan 2017 5:31 pm 

    To belabor the point I had made especially towards your post Plant. We are now in an era whereby rules and laws will be ignored, bypassed or modified to remain competitive. This is now a time of hard ball with the gloves off. Countries and peoples are struggling for survival if not yet in a literal sense in a figurative one. Certainly the big boys, want to remain on top. Saudi and the US are into together so they will want to fudge the numbers. The question will be will the rest of the world believe it?

  10. shortonoil on Fri, 27th Jan 2017 7:16 pm 

    This study will be completed by January 1, 2019. The results will be available after all parties have granted their approval. That should be no later than 2057.

  11. Survivalist on Fri, 27th Jan 2017 9:54 pm 

    Total, Exxon, She’ll, BP and Chevron produce about 12 million barrels a day between them. Together they are all worth about 950 Billion USD.

    SA produces 10 million a day and MbS think they’re worth 2 trillion.

    Share value has a lot to do with taxation rules that apply to the company.

    Anyone who thinks SA is worth 2 trillion is an idiot.

  12. joe on Fri, 27th Jan 2017 11:12 pm 

    So Cloggie thinks theres jobs for millions of would be jihadis in solar energy. He allso thinks that the Al Saud family will generously spend all the money from the worlds greatest oil scam on the good and moral muslims of Yemeni famine causing Saudi Arabia. Usama Bin Laden was one prince, from another non Saudi Arab tribe, imagine what a few hundred could do. The Saudis buy loyalty and thats all. Heck if they acted in the interests of Arabs then oil money should have built the worlds most advanced economy decades ago. Are you really that naive Cloggie.

  13. Cloggie on Sat, 28th Jan 2017 2:18 am 

    So Cloggie thinks theres jobs for millions of would be jihadis in solar energy.

    Where the hell did I say that? These camel jockeys are good for nothing, but at least does their “elite” understand that oil is slowly running out and that it is a better idea to spend to spend a portion of their oil wealth on solar (no doubt to be installed by western companies), rather than spend it all on European hookers.

    He allso thinks that the Al Saud family will generously spend all the money from the worlds greatest oil scam on the good and moral muslims of Yemeni famine causing Saudi Arabia.

    You really make it up as you go, don’t you? I am the one who is most fulminating here against the disastrous consequences of mass migration and now I have to let myself being told by a Brit, of all people, that I am naive about Muslims?

    Must I really remind you that Britain is the only European capital with a Muslim major and a Muslim majority, once the continental Euro’s will have left the building after the coming hard Brexit?


    Where is Hitler when you need him most, right joey-boy?

    But if you have a good look at the spleeny half Germanic-half Gaelic DNA, than you know that there is no hope for Britain at all. Britain, the next al-Andaluz.

  14. Denial on Sat, 28th Jan 2017 11:09 am 

    Well Britain is in trouble but welcome to the new world; she does have some major oil companies and an army to steal take or whatever you want to call it oil……they are trying to get backing from the U.S to help keep status quo going….But how is the U.S any better…it takes in a lot of foreign oil and other resources …..and getting hungrier every day….
    To be a good american you have to use as much oil as possible….I have seen people in the states castigate people who drive small cars and live in small houses and use solar as fools, un-American , socialist….
    I am not sure what the outcome will be—I know on here and other sites is that the meme is that it won’t be high oil prices but low oil and low demand…demand destruction…
    but I don’t know I think it will be a combination of swings to high oil and run away inflation…..

    The U.S debt is too great to not have inflation to pay it off…..Oil will be a $100 dollars a barrel and wages in the u.s will be $25 an hour…

  15. Nony on Sat, 28th Jan 2017 5:08 pm 

    They have top notch external auditors and they have a very professional oil company. I think it would be much harder to cook the books in a self consistent manner as to what Rock believes.

    I have always felt that SA has MORE oil than they let onto. Not less. For one thing peak oil worries help elevate the world price. For another thing they burn crude directly for power generation.

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