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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Aramco Begins Marketing First Dollar Bond

Saudi Aramco has started marketing its first dollar-denominated bond to investors. The Islamic bond is divided into three portions, maturing in three, five, and ten years, respectively, according to a Bloomberg report that cited unnamed sources familiar with the move.

Media reported earlier this month Aramco was planning to raise $5 billion from a bond sale to fund its dividend of $75 billion.

Saudi Arabia, like its fellow Gulf oil producers, has taken to raising debt to weather the effects of two oil price crises in the past ten years—the more recent one particularly devastating. For Aramco, debt is a better option than reducing its dividend, as most of this goes into the rulers of the Kingdom, who are also majority owners of the company.

"I think it was expected. They need the cash to pay the dividends that have been promised, they've done it in the past too," a debt banker told Reuters, commenting on the report of the upcoming bond issue.

The Saudi state-held oil giant has been very active on the debt market in recent months after last year's crisis reduced its profits. The company reported a 44-percent slump in net profits for last year, to $49 billion. At the same time, Aramco continues to pledge annual dividends of $75 billion to shareholders, the biggest of which is the Kingdom of Saudi Arabia, with more than 98 percent.

Over the past two years, Saudi Aramco's debt levels have jumped nearly four times as the oil giant had to finance its acquisition of a majority stake in Sabic. Then the collapse in oil prices hit its revenues and profits.

Aramco may not be the only giant energy firm to tap the bond market this month as the state firms of the Gulf oil producers are looking to raise cash after the 2020 crisis hit profits and government revenues.  

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on June 09 2021 said:
    With Brent crude oil price exceeding $72 a barrel and with Saudi Arabia exporting an estimated 7 million barrels a day (mbd), Saudi Aramco could be earning almost $183 bn this year. This means that Saudi Aramco could easily pay the $75 bn of dividends without having to issue a new multi-billion dollar bond.

    It is possible, however, that Saudi Aramco wants to tap the global money market with interest currently low while building up its cash flow for the future.

    I am projecting that Brent could hit $70-$80 much earlier than my earlier projection that this will happen in the third quarter of 2021 and Saudi oil exports are going to increase with OPEC+ increasing production from July onwards. This means that Aramco’s oil revenue this year could be even higher than $183 bn.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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