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Saudi Aramco, the world’s largest oil company, said on Monday it had raised $5bn in a bond sale as it positions for a downturn in oil prices and prepares for further borrowing.
Aramco said demand for the three sets of bonds it issued in London had been “strong”, with coupons ranging from 4.75 per cent to 6.375 per cent.
The issuance was one of the largest in London so far this year, after the Public Investment Fund, the Saudi sovereign wealth fund, tapped the debt market for $4bn in January, and UK building society Nationwide sold €3.25bn and £1bn of bonds during the first quarter.
Ziad Al-Murshed, chief financial officer at state-controlled Aramco, said global investors had faith in the company’s “robust balance sheet”.
Aramco may return to the debt market in the near future, after publishing a prospectus for Islamic bonds last week. In June last year, Aramco launched the largest ever corporate Islamic bond, raising $6bn.
The company made a net profit of $106bn last year, and carries little debt compared to its peers.
However, Aramco’s balance sheet has come under pressure in recent months as lower oil prices make it harder for the company to pay out the large dividends sought by the Saudi government, its main shareholder, to help finance economic diversification projects in the kingdom.
Brent crude was trading at $62 a barrel on Monday, compared to $82 in mid-January.
In last week’s Islamic bond prospectus, Aramco said its gearing, or debt to equity ratio, had risen from 4.5 per cent at the end of last year to 5.3 per cent at March 31.
Al-Murshed said on Aramco’s last earnings call in May that the company had reduced its borrowing “significantly” over the past three years until last year, when “we started levering up, as promised, to target a more optimum capital structure”.
Amin Nasser, chief executive, said on the same call that demand for oil was robust, and that global stores of crude were running “at five-year lows”.
He added that a decision by Opec, the oil cartel, to increase production in May would result in Aramco pumping 200,000 extra barrels of crude a day, worth roughly $1.9bn of annual cash flow at a price of $60 a barrel.
Nevertheless, the company warned in March that lower prices would mean its annual dividend would fall by nearly a third.
Last week, Mohammed al-Jadaan, the Saudi finance minister, said the kingdom would “take stock” of its spending plans as it faced lower oil revenues.
A “crisis provides us an opportunity to take stock and consider”, he told the Financial Times. “Are we rushing [projects]? Are there unintended consequences? Should we delay? Should we reschedule? Should we accelerate?”
