Saudi Arabia’s oil giant Aramco plans to issue U.S.-denominated bonds, with the exact amount subject to market conditions, the world’s largest oil-producing company said on Monday, as it has doubled down on paying huge dividends amid profit slumps.
Citi, Goldman Sachs International, HSBC, J.P. Morgan, Morgan Stanley, and NCB Capital will be underwriters of the upcoming bond issue, which will be in several tranches with a maturity of 3, 5, 10, 30 and/or 50 years, subject to market conditions, Aramco said in a filing with the Saudi stock exchange Tadawul.
The total U.S. dollar amount of the bonds, the par value, the price, and the return will be subject to market conditions, the Saudi oil giant said.
Aramco is back on the international bond market after the oil price crash.
Last year, Aramco issued US$12 billion bonds in several tranches in its first international bond issuance, for which it had received more than US$100 billion in orders.
The collapse in oil prices—which Saudi Arabia helped to create by flooding the market with oil in April—led to significant annual declines in Aramco’s quarterly profits this year.
While profits have slumped, Aramco’s debt has grown after the US$69-billion acquisition of SABIC. At the same time, the world’s biggest oil firm continues to pledge to pay out annual dividends of US$75 billion to shareholders, the Kingdom being the largest of them with more than 98 percent.
The massive dividend of Aramco cannot fund the widening budget gap of Saudi Arabia if oil prices remain low beyond 2021, Moody’s said last month.
The Saudi budget depends to a large extent on the royalties, taxes, and of course, the dividend from Saudi Aramco.
The company has an “ambitious” dividend target, which could result in Aramco’s post-dividend free cash flow (FCF) turning negative in 2020 and 2021 before broadly breaking even in 2022-2023, Fitch Ratings said last week as it revised its outlook to negative from stable after a similar revision for the sovereign.
