Saudi Arabia’s Aramco, the world’s largest oil company, is set to issue a bond this year as it embarks on a new financial strategy that emphasizes longer-term bonds to optimize its capital structure, its Chief Financial Officer Ziad Al-Murshed said. This move comes as part of the company’s broader efforts to navigate evolving market conditions and ensure financial stability amid global economic shifts, the executive said while addressing the Saudi Financial Market Forum in Riyadh.
The company intends to issue bonds with a focus on longer maturities of up to 50 years. It underscored that this planned issuance aligns with Aramco’s strategic vision, aiming to leverage favorable market conditions to bolster its financial resilience.
Adapting to market dynamics
Aramco’s decision to tap into global debt markets reflects a shift in strategy from its last major debt issuance in 2021. In its last issuance, the company raised $6 billion through the sale of a three-tranche sukuk, or Islamic bond. It will now be able to capitalize on recent declines in global interest rates following Saudi Arabia’s $12 billion dollar-denominated bond issuance in January. Aramco highlighted its readiness to seize opportunities in a more stable market environment, indicating increased activity on the horizon.
Moreover, recent directives from Saudi Arabia’s Ministry of Energy have influenced Aramco’s operational targets. The company planned to boost its maximum sustainable capacity to 13 million barrels daily. However, the ministry halted that decision, ordering Aramco to return to the previous 12 million barrels per day target.
Financial yields
As Aramco prepares to announce its annual financial results and dividend payments in March, speculation swirls around potential moves to sell more shares. Last year, the company introduced a special, performance-based dividend.
While Saudi Arabia’s government remains the company’s dominant shareholder, reports suggest plans to offload additional shares. Hence, this will allow Aramco to bolster funding and facilitate the country’s economic diversification efforts.
Analysts estimate that a potential share sale could yield approximately $20 billion. This presents significant financial opportunities for both Aramco and the Saudi government. Such proceeds could further support the Kingdom’s ambitious plans to reduce reliance on oil revenues and promote economic diversification.
Read: Saudi Tadawul Group opens third edition of Saudi Capital Market Forum
Aramco’s previous offerings
Aramco’s journey in the financial markets traces back to its historic initial public offering (IPO) in late 2019, which remains the world’s largest to date. With an initial fundraising of $25.6 billion and subsequent share sales, the company has demonstrated its ability to navigate complex financial landscapes and secure substantial investments.
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