By Maha El Dahan, Hadeel Al Sayegh and Yousef Saba
DUBAI (Reuters) -Saudi Arabia is poised to raise more than $11.2 billion selling shares in oil giant Aramco (TADAWUL:2222) to help fund its spending plans, after pricing the stock at the lower end of its expectations, the company said on Friday.
Aramco shares were priced at 27.25 riyals ($7.27) after the company set a price range of 26.7 to 29.0 riyals.
The offering was covered four to five times, a person familiar with the matter said.
International demand was greater than for Aramco's IPO in 2019, two people said, and included interest from China, elsewhere in Asia as well as Europe, another person said.
Saudi Arabia has been seeking to lure international investment to pour tens of billions of dollars into projects to diversify away from its reliance on oil. Yet foreign investment has repeatedly missed targets.
Foreign demand for this sale was stronger than anticipated, one person said, but Reuters could not establish the proportion that went to international investors.
The Saudi government and Aramco did not immediately respond to a request for comment.
Saudi de facto ruler Crown Prince Mohammed bin Salman's Vision 2030 is funding endeavours as diverse as electric vehicles to building futuristic cities in the desert, mainly via its Public Investment Fund (PIF).
The $925 billion sovereign fund, after scaling back some of its flagship "giga-projects", aims to sharpen its focus to drive forward the vision, Reuters has reported.
Proceeds from the share sale are likely to be funnelled to the PIF, sources and analysts have said, though funds could also help plug the kingdom's budget deficit which has risen as the oil price has weakened.
Brent crude was trading just below $80 a barrel on Friday, set for a third straight weekly loss. The IMF projected in April that Saudi Arabia needs oil at $96.2 a barrel to balance its budget.
"It is not clear that oil prices will continue to go up the way they have over the last several years," Edward Al-Hussainy, head of emerging market fixed income research at Columbia Threadneedle, said on the reason for the sale.
The de facto Saudi-led Organization of the Petroleum Exporting Countries and allies, including Russia, agreed to extend most production cuts into 2025 but outlined a detailed plan for eight members including Saudi Arabia to unwind some voluntary cuts over a year from October, market conditions permitting, which would allow Aramco to sell more oil.
The Saudi government "need this liquidity, and they are very cash poor because of these investment projects," Al-Hussainy said, adding, "they're coming at this from a position of weakness."
Aramco's shares were sold at a nearly 4% discount to where they closed on Thursday, valuing the company at about $1.76 trillion.
The secondary offering, codenamed Project Bond by the banks involved, took months of planning, sources have said. The 2019 IPO remains the world's biggest ever share offering.
Aramco, a cash cow for the Saudi state, has boosted dividends, introducing a new performance-linked payout last year to entice investors even as lower production hit earnings. Saudi Arabia is producing about 75% of its maximum capacity of crude oil.
Some international investors said they were put off by the company's relative high valuation among oil majors, Saudi state control and its positioning in an era of transition away from hydrocarbons.
The Saudi government is selling a roughly 0.64% stake in Aramco and can increase the sale to 0.7% of the oil giant via a so-called greenshoe option, which allows banks to stabilise the price of the offering.
If that option is exercised, the Aramco sale would raise roughly $12.36 billion.
The shares are set to start trading Sunday on Riyadh's Saudi Exchange.
($1 = 3.7504 riyals)