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Aramco is considering staggering payments for the 70 percent in chemicals conglomerate Sabic that it said it would acquire last year.
Bloomberg reports that the options the oil major was mulling over involved delaying payments for the majority stake in Sabic as well as reducing the initial installment to the seller, Saudi Arabia’s sovereign wealth fund.
Aramco signed the deal to buy 70 percent in Sabic from the Public Investment Fund of Saudi Arabia in March 2019, for the equivalent of US$69.1 billion in Saudi riyals at the time. The acquisition was part of Aramco’s preparation for going public, which happened, after much anticipation, at the end of last year.
Meanwhile, an exclusive Reuters report said that Aramco was also looking to review the price of the Sabic acquisition. The chemicals major’s market value, according to the report, which cited unnamed sources, had fallen by 40 percent since the start of the latest oil price rout, with the price Aramco paid for the 40-percent stake high above the current trading price of Sabic.
The Reuters report also notes Aramco has also suffered the fallout of the oil price crisis. The company is supposed to pay some $75 billion in dividends to its majority owner, the Saudi government, but its free cash flow is less than that, hence the need to review the Sabic deal.
The sovereign wealth fund, meanwhile, was looking to extend the maturity of a $10-billion loan that it took with ten banks last year to boost the availability of short-term funding for new investments. The loan was to be repaid after the completion of the Sabic deal.
Separately, the Saudi government is turning to bond markets amid persistently low oil prices that have pressured oil revenues. Last month, Riyadh issued its second bond since the start of the year, at $7 billion, after a much more modest first one, at $2.5 billion.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.