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By Summer Said and Nicolas Parasie 

The Saudi Arabian Oil Co., the world's largest energy firm, is planning to list less than 5% of its value on stock exchanges in Riyadh and possibly the U.S., the kingdom's deputy crown prince said Monday, setting up one of the largest IPOs ever.

By listing even a tiny fraction of the company, known as Saudi Aramco, the offering would create one of the world's most valuable businesses. Prince Mohammed bin Salman said Aramco was worth between $2 trillion and $3 trillion, meaning a 5% listing could raise $100 billion to $150 billion.

The listing would create a new threshold of public accountability for a secretive state-run company that currently doesn't disclose its annual revenues, profits and debts. It could also bring new scrutiny to Saudi Arabia's proved reserves of crude oil, which have stood at around 260 billion barrels for years without significant new finds, even though the company pumps more than 3 billion barrels of oil or more a year.

"Aramco's listing has many benefits, the most important and before everything is transparency," the prince said in an interview with television network Al Arabiya. "It will be under the supervision of all Saudi banks, all analysts, all Saudi thinkers. Even more, all international banks and research and planning centers in the world will monitor it intensively."

The prince outlined plans for Aramco -- much of which had been previously reported -- as he announced a plan to transform the kingdom's oil-dependent economy into one more focused on private enterprise. The Saudis are trying to raise cash during a period of sharply lower oil prices, and transition to a world that is less dependent on oil.

It isn't clear how the prince came up with the valuation of $2 trillion to $3 trillion, or whether investors will jump at the chance to invest in a company that is essentially an arm of the Saudi government.

But the listing has sparked a frenzy among bankers focusing on the Middle East, a region where public offerings have become rare following the drop in oil prices and related stock market volatility.

The plan was initially met with skepticism by bankers who said Saudi Arabia was unlikely willing to share with the world some of its most closely held financial information, But bankers now regularly travel to Riyadh in the hope to win an advisory mandate on what could eventually become one of the world's largest IPOs ever.

Bankers say no adviser has been retained yet for the IPO specifically but international lenders such as J.P. Morgan have been active in the kingdom for decades and can fall back on close ties with the Saudi government and entities such as Aramco. Consultancy McKinsey is also playing an important role by advising the Saudi government, these bankers have said.

The prince said the company would be jointly listed in Saudi Arabia and possibly the U.S. in a process that could take six to nine months from now. A top Saudi oil adviser, Ibrahim Muhanna, told The Wall Street Journal last week that New York was the leading contender for the second listing, with London and Hong Kong also in contention.

Paul Hodges, a special adviser to ICIS, the petrochemicals information company, said the culture change awaiting Aramco would be similar to what Chinese companies went through 15 years ago when that country prepared to enter the World Trade Organization.

"The process of listing will completely change the character of the company, and demand a new openness from its senior management," Mr. Hodges said.

An unresolved question remains whether a listing will include the division of Aramco that includes its vast reserves of crude oil. It manages, but doesn't own, the kingdom's reserves. A number of Saudi experts and insiders have said Saudi Arabia wouldn't include its production assets in any listing. Its methods and reserves tantamount to state secrets.

Robin Mills, nonresident fellow for Energy at the Brookings Doha Center, said Aramco would have to spell out its loyalties to the government and the royal family clearly in any IPO. It would also have to disclose more details about its reserves production and finances, he said.

"There would also have to be minority shareholder protection and a fiduciary duty for the board," Mr. Mills said.

The company produces more than 10% of the world's oil supply every day and controls a large chain of refineries and petrochemical facilities to complement its exploration and production operations.

It has already undergone a substantial transformation in recent years, building out a significant ability to refine its own crude oil into products like gasoline and diesel. A key goal for the company is to become the world's largest refiner.

Write to Summer Said at summer.said@wsj.com and Nicolas Parasie at nicolas.parasie@wsj.com

(END) Dow Jones Newswires

April 25, 2016 15:02 ET (19:02 GMT)

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