The energy giant may try to raise $ 5 billion in sukuk, or Islamic bonds, to help fund its $ 75 billion dividend commitment, Bloomberg News reported.
Saudi Aramco is preparing to return to global capital markets with a bond that would help fund a $ 75 billion dividend commitment, according to people familiar with the plan.
The world’s largest energy company has chosen about 15 banks to handle a sale of Islamic debt, or sukuk, that could happen this month, according to people who are aware of it. One person said the state-controlled company could raise about $ 5 billion.
Aramco is considering selling sukuk in dollars and in local currency, according to people. No decision has been made and the company may suspend the deal if market conditions deteriorate. Aramco declined to comment.
Several other state-owned energy companies in the Persian Gulf are also reflecting on euro sales. Qatar Petroleum may emit up to $ 10 billion in the coming weeks, while Energy Development Oman seeks to raise about $ 3 billion.
Saudi Aramco’s profits soared during the first quarter amid a recovery in global oil and gas markets, although free cash flow remained too low to fully cover its dividend during the 18-year period. $ 75 million. Virtually all of the firm’s payments go to the Saudi government, which is trying to reduce a budget deficit that last year widened to 12% of gross domestic product.
The price of oil, the lifeblood of Saudi Arabia, has doubled since October to more than $ 70 a barrel as major economies vaccinate their citizens and reopen businesses. The increase has also been supported by the cartel of OPEC + producers, of which Saudi Arabia is a leading member, reducing exports.
In response to the crude oil crash early last year, Aramco cut spending, cut jobs and opted to sell non-core assets. A U.S.-led group agreed this April to buy leasehold rights on Aramco pipelines for $ 12.4 billion.
Aramco’s debt levels continued to rise substantially, mainly due to its $ 69 billion acquisition of chemical maker Saudi Basic Industries Corp., a deal agreed before the pandemic hit. Gear (a measure of debt as a percentage of equity) rose from at least 5% in early 2020 to 23% in March this year, above the company’s self-imposed 15% limit.
Capital spending is expected to rise this year to $ 35 billion, but it will still fall short of the indications given during Aramco’s initial public offering in 2019.
The Dhahran-based firm, which is listed on the Saudi stock exchange, last took advantage of international debt markets in November. It raised $ 8 million in conventional bonds with maturities of three to 50 years.