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Saudi Arabia Aramco, the world’s largest oil company, said Monday it raised $5 billion in bond sales as it occupied a slump in oil prices and is preparing for further borrowing.
Aramco said the demand for the three sets of bonds issued in London is “strong” with coupons in the range of 4.75% to 6.375%.
The issuance is one of the biggest in London to date this year after the public investment fund, Saudi Arabia Sovereign Wealth Fund, tapped the debt market for $4 billion in January, with the UK Building Association nationwide selling 3.25 billion euros and £1 billion in bonds in the first quarter.
Ziad Al-Murshed, Chief Financial Officer of State Management Aramco, said global investors have confidence in the company’s “robust balance sheet.”
Aramco can return to the debt market in the near future after releasing its Islamic debt prospectus last week. Last June, Aramco launched the largest corporate Islamic bond ever, raising $6 billion.
The company generated a net profit of $106 billion last year, with little debt compared to its peers.
However, Aramco’s balance sheet has been under pressure in recent months as lower oil prices make it difficult for the Saudi Arabian government, the major shareholder, to pay the large dividends sought to help fund the Kingdom’s economic diversification projects.
Brent crude was trading at $62 per barrel on Monday, compared to $82 in mid-January.
In last week’s Islamic bond prospectus, Aramco said its gearing, or equity-to-stock ratio, rose from 4.5% at the end of last year to 5.3% on March 31.
Al-Murshed said in May’s last revenue call that the company had “significantly” declined over the past three years until it “started to utilize it as promised to target a more optimal capital structure.”
Chief Executive Amin Nasser said in the same phone that demand for oil is robust and that global crude oil storage is running “at five-year lows.”
He added that OPEC’s decision to increase production in May would mean that Aramco will pump 200,000 barrels of crude oil a day.
Nevertheless, the company warned in March that lower prices mean that annual dividends would be reduced by almost a third.
Last week, Saudi Finance Minister Mohamed Al Jadan said he would “stock” its spending plans as the kingdom faced lower oil revenues.
“The crisis offers us the opportunity to stock up and consider,” he told the Financial Times. “Are we in a hurry (project)? Are there any unintended consequences? Should we delay? Should we change the schedule? Do we need to accelerate?”
