(Bloomberg) -- Oman’s state energy company OQ SAOC is looking to raise about $2 billion by selling shares in its exploration and production business in an initial public offering that’s set to be the Gulf country’s biggest on record.
The deal would value all of OQ Exploration & Production SAOG at about $8 billion, according to two people with knowledge of the matter, who declined to be identified discussing confidential information. OQ plans to sell a 25% stake in OQEP, as the business is known, it said Monday, without disclosing details on valuation.
A sale of that size would raise the most of any Persian Gulf IPO so far in 2024, and would be the biggest since Adnoc Gas Plc’s IPO last year.
To help attract investors, the firm plans to pay out $600 million in annual dividends each year from 2024 through 2026. In 2025 and 2026, the company also plans to pay a performance-linked dividend equal to 90% of cash flow after investments, according to a statement.
While the company is basing its budget on crude hovering between $70 a barrel and $80 a barrel, the dividend payments “will be sustained outside that range,” said Chief Executive Officer Ahmed Al-Azkawi.
“Our plans were tested against all the risks, including the oil prices at very low values,” Al-Azkawi said in an interview. “Our debt capacity is big, so we don’t see any risk in sustaining the dividends at the moment.”
The IPO — and the promise of dividends — comes as Brent crude last week fell to the lowest level since 2021 on concerns over global demand. Oman, Saudi Arabia and the United Arab Emirates are all members of the OPEC+ producers’ group which has been cutting production for several years to help prop up the market.
Privatization Drive
Listings in the Middle East have picked up after a summer lull, and investor appetite has been strong. There have been a flurry of announcements over the past month across sectors, including a perfume maker, two flour millers, an oil services provider and a food delivery firm.
In all, firms have raised just under $4 billion via IPOs on Gulf exchanges so far this year, according to data compiled by Bloomberg. EFG Hermes has said it expects the boom to continue.
Oman is also pursuing an ambitious privatization strategy of its own. OQ has hired Morgan Stanley and local banks to work on the IPO of its methanol and liquefied petroleum gas unit, Bloomberg News reported in March. That share sale is also slated for this year although timings may change, people familiar with the matter said at the time.
Shares in OQEP will begin trading on the Muscat Stock Exchange in October, according to the statement. HSBC Holdings Plc, Natixis SA, Sohar International Bank SAOG and Oman Investment Bank are the joint global coordinators for the sale.
The company plans to take on additional oil and gas projects within Oman before potentially expanding abroad over the next two to five years, Al-Azkawi said. The country is developing projects like power and chemicals that require more gas supply, he said.
Oman will likely need to continue importing gas via the Dolphin pipeline from Qatar and aims to decide within the next year or two whether to extend that contract beyond its current 2032 expiration date, he said.
OQEP’s proposed performance-dividend policies follows a similar formula adopted by Saudi Aramco, the world’s most valuable oil company, which has also laid out a mechanism for distributing extra profit to investors.
Last year, OQ floated its gas pipelines business in a $749 million IPO as well as its oil-drilling unit Abraj Energy Services SAOG. Meantime, Oman’s wealth fund is planning several dozen listings over the next few years, including the state power utility and a logistics firm, Bloomberg News has reported.
The Gulf nation is also chasing an upgrade to emerging market status by broadening its capital markets — the Muscat Stock Exchange is among the smallest bourses in the region.
--With assistance from Kateryna Kadabashy.
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