February 19, 2024 [BNN Bloomberg]- Saudi Aramco may sell bonds this year as financial markets have improved and the company looks to offer longer-dated debt, according to the state oil producer’s finance chief.
The company could issue debt with a duration of 15 to 50 years, Chief Financial Officer Ziad Al-Murshed said at a conference in Riyadh. The ability to sell debt with that duration indicates investors see Aramco, which already has one 50-year bond, remaining relevant in the business of selling oil and natural gas for transport and chemicals production through at least 2070.
“Markets are becoming more stable, so you can expect us to be active in the market,” Al-Murshed said. “We’re always prioritizing longer-term over short-term” maturities. When asked if the company could sell bonds in 2024, he said that was “likely.”
Economies have been battered by persistent inflation and higher energy costs over the past few years as governments seeking to bounce back from the pandemic have contended with conflicts from Europe to the Middle East. As the world’s biggest crude exporter and OPEC’s leader, Saudi Arabia has been spearheading a cut in oil production to stop barrels from building up in storage and further pressuring prices.
Global oil markets have “sufficient” supply, Al-Murshed said. Spare crude production capacity is at about 3% of global demand, he added.
Separately, Al-Murshed declined to comment on the potential sale of Aramco shares by the Saudi government.
Dividend Payout
Aramco, which reports full-year earnings in March, has so far maintained its dividend to the Saudi government despite the lower production and oil trading below last year’s peak. The Organization of Petroleum Exporting Countries and allied countries including Russia have extended output curbs into this year. Some members, including Saudi Arabia, have made additional voluntary cuts that they could extend in the second quarter.
Even with lower production, Aramco has been able to support and even increase its dividends. The company’s payouts are a key component of the Saudi government’s income and are ever more vital as Crown Prince Mohammed bin Salman pursues expensive projects, while looking to diversify the economy from oil.
Read More: Aramco Keeps $29 Billion Payout Even as Oil Production Falls
The company will continue to pay what it can afford and won’t need to issue debt to support the dividend, Al-Murshed said. The base dividend will be “sustainable and progressive,” meaning the company aims to increase it in coming years, he added.
Aramco last year began making a special, performance-based payout based in part on bumper profits in 2022. The company will continue to do so this year and is set to outline the amount it will pay quarterly when it reports earnings next month.
Aramco sold its first bonds in 2019, garnering interest from the market for roughly 10 times the amount of securities the company was offering. Those maiden bonds had maturities of three to 30 years. Aramco sold its first 50 year bond in 2020.
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