Global interest in oil and gas related assets remains high, perhaps higher than ever. In a statement from Abu Dhabi’s national oil company ADNOC, the company said that was the case Raised $2.5 billion from the IPO of its gas business. So far, this is the largest listing of 2023 and shows that the Middle East, particularly the United Arab Emirates, Qatar and Saudi Arabia are in the spotlight of international finance. ADNOC also reiterated that the IPO was 50 times oversubscribed as it received more than $124 billion in investor orders for its 5% stake in ADNOC Gas. The national oil company, ADNOC Gas’s parent company, has valued the shares at 2.37 dirhams ($0.65) each after offering a range of 2.25 to 2.43 dirhams. That price range puts ADNOC Gas’s value at around $50 billion, the same value as US oil and gas major Occidental Petroleum. The main reason for the extremely high interest in ADNOC Gas is the global energy crisis, which is largely related to the gas market. The effects of Russia’s war in Ukraine, combined with Western sanctions against Moscow, and the debilitating impact of renewable energy, unable to fill the gap left by Russia in Europe, are the main causes of the gas crisis. For ADNOC Gas, the scarcity of gas supplies is reflected in its fiscal year 2021-2022 financials, which show record revenues of $8.7 billion for the 12 months ended October. Even with lower prices, strong global gas demand is expected and prices are expected to remain elevated at least into 2026. ADNOC Gas and others have invested billions of dollars to keep up with expected demand in the future. ADNOC Gas shares are expected to start trading on March 13th.
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ADNOC increased its offering size by 25% last week due to strong investor interest. High energy prices and a very positive outlook for the next few years are expected to generate strong cash flow and new gas related IPOs are expected in the region in the next few years. ADNOC Gas’ IPO is the Abu Dhabi giant’s most successful yet. Retail investors placed orders worth US$23 billion (58 times oversubscribed). But the main investors are institutional investors, including Abu Dhabi state-owned companies that have pledged to buy $850 million worth of shares in the IPO, such as Alpha Dhabi and International Holding. Just prior to the IPO, 5% of ADNOC Gas was transferred to TAQA, Abu Dhabi’s state-owned energy company.
ADNOC Gas will focus on reaping the rewards of Abu Dhabi’s gas reserves, which rank seven in the worldth largest as it aims to triple its LNG exports to 15 million tons per year.
More IPO-related news is expected over the next few months as other parties in the region have scrutinized the results and investors’ appetite for hydrocarbon-related assets. No doubt Qatar will reassess its options as the world’s largest gas exporter seeks to retain its dominant role. Any additional sale of stakes in its LNG-related businesses would be a huge boost for the country. North African gas producer Egypt could also consider going public. To revitalize its economy, Cairo may explore the possibility of publicly offering a stake in its fast-growing LNG industry to make extra money without having to ask Arab producers for a new tranche of financial support.
The most surprising offer could then come from Aramco. As Saudi Crown Prince, Mohammed bin Salman is toying with the idea of offering more shares to the public, and the success of ADNOC Gas’ IPO will not go unnoticed in Riyadh. A possible sale of another 2.5-5% of Aramco could be a very attractive offer for the Saudis. The current high valuation of hydrocarbon assets and the need to fund mega-projects like NEOM and Oxagon could be a big stimulus for Riyadh decision-makers.
By Cyril Widdershoven for Oilprice.com
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