Aramco Tax Cut Boosts Upstream Value Ahead of Expected IPO

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Faced with declining government revenues from the oil and gas sector after the oil price crash and looking to diversify its economy, Saudi Arabia is reportedly planning to list 5% of its state-owned oil giant, Saudi Aramco, in an Initial Public Offering (IPO) in late 2018. With a view to making the listing more attractive by improving Aramco’s cash flows, the government published a decree on March 27 slashing the company’s tax rate from 85% to 50%. However, even taking into account the effect of this change, there is significant uncertainty over whether the company can achieve a much-vaunted US$2 trillion valuation.

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