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Aramco eclipses top earner Apple ahead of debut $10 bln-plus bond sale


Saudi Aramco, the world’s biggest oil producer, made core earnings of $224 billion last year, almost three times as much as Apple, figures from the state-owned company showed on Monday ahead of its debut international bond issue.

Previously reluctant to disclose its financials, Aramco had to reveal them in order to obtain a public rating and start issuing public international bonds.

Despite the huge profit, the state-owned oil giant was rated by credit agencies at par with Saudi Arabia, meaning the kingdom’s sluggish economy will weigh on Aramco’s cost of borrowing as it prepares its bond market debut.

Saudi energy minister Khalid al-Falih said earlier this year the planned bond sale would raise around $10 billion, but banking sources said the transaction could be larger.

Rating agencies Fitch and Moody’s rated Aramco A+ and A1 respectively, but both said that without sovereign rating constraints Aramco would be in the same league as better-rated international oil companies like Exxon Mobil, Chevron and Shell.

“Saudi Aramco’s rating is constrained by that of Saudi Arabia (A+/Stable),” Fitch said. “This reflects the influence the state exerts on the company through taxation and dividends, as well as regulating the level of production in line with its OPEC commitments.”

Fitch put Aramco’s standalone credit profile at “AA+.”

Credit ratings allow investors to compare and assess the credit quality of bond issuers and their debt securities, and are important in determining how much borrowers have to pay.

The planned bond deal is Aramco’s inaugural transaction in international markets. It still plans to launch an initial public stock offering or IPO in 2021, expected to generate $100 billion, having postponed its flotation from 2018.


“Saudi Aramco has many characteristics of a Aaa-rated corporate, with minimal debt relative to cash flows, large scale of production, market leadership and access in Saudi Arabia to one of the world’s largest hydrocarbon reserves,” said Rehan Akbar, senior credit officer at Moody’s.

The group has 257 billion barrels of oil equivalent, representing over 50 years of reserves based on current production levels, according to a company presentation given to investors and seen by Reuters.

Aramco will start meeting international bond investors this week for the much anticipated debt transaction, expected to attract hefty demand from global investors.

The planned bond sale follows the announced acquisition of a 70 percent stake in Saudi Basic Industries Corp (SABIC) , the world’s fourth-largest petrochemicals maker, from Saudi Arabia’s Public Investment Fund (PIF), in a deal worth $69.1 billion.

The bond sale, which may be split into tranches with maturities ranging from three to 30 years, is not linked to the SABIC acquisition, Aramco said.

Aramco intends to pay for the acquisition in tranches, with 50 percent at the closing of the transaction and the remainder over a two-year period, from internal cash generation and, potentially, other resources, the company said in its presentation.


Aramco had earnings before interest, tax and depreciation (EBITDA) of $224 billion in 2018. By contrast Apple, which according to Forbes was the world’s top company in terms of profits last year, had normalized core earnings, or EBITDA, of $81.8 billion.

“Saudi Aramco has an extremely strong liquidity position,” Moody’s said, with $48.8 billion in cash against $27 billion in reported debt.

“The company’s balance sheet leverage has been conservatively managed,” said the agency, adding it has $46.8 billion of bank facilities, of which about $25.5 billion was still available.

Aramco representatives will meet with investors in Asia, Europe and the United States through Friday, April 5, according to a document issued by one of the banks leading the deal.

The roadshow has no planned stop in the Middle East, showing the transaction is mostly aimed at international buyers.

“The blue-chip company is extremely profitable, free cash flow positive, has low leverage and strong reserves for the future, making it a compelling investment case for global investors,” said Parth Kikani, fixed income director at Emirates NBD Asset Management.

Aramco is presenting itself to global investors as an “anchor of global energy” and a global energy provider of systemic importance, producing one of every eight barrels of global crude, according to the investor presentation.

It had $86 billion in free cash flow at the end of 2018.

The SABIC acquisition, at the heart of Aramco’s push to expand in the downstream business, will not impact Aramco’s rating, the company said in the presentation.

Aramco has hired Lazard as financial adviser for the planned bond deal, and JP Morgan and Morgan Stanley as global coordinators. They are joined by Citigroup, Goldman Sachs, HSBC and NCB Capital as bookrunners.


4 Comments on "Aramco eclipses top earner Apple ahead of debut $10 bln-plus bond sale"

  1. Robert Inget on Tue, 2nd Apr 2019 11:46 am 

    I’ll nominate the following article ‘Peak Oil’
    champ of the young month.

    Here’s a taste followed by comment.

    It was a state secret and the source of a kingdom’s riches. It was so important that U.S. military planners once debated how to seize it by force. For oil traders, it was a source of endless speculation.

    Now the market finally knows: Ghawar in Saudi Arabia, the world’s largest conventional oil field, can produce a lot less than almost anyone believed.

    When Saudi Aramco on Monday published its first ever profit figures since its nationalization nearly 40 years ago, it also lifted the veil of secrecy around its mega oil fields. The company’s bond prospectus revealed that Ghawar is able to pump a maximum of 3.8 million barrels a day — well below the more than 5 million that had become conventional wisdom in the market.

    “As Saudi’s largest field, a surprisingly low production capacity figure from Ghawar is the stand-out of the report,” said Virendra Chauhan, head of upstream at consultant Energy Aspects Ltd. in Singapore.

    King of Oil
    Saudi Arabia relies on a handful of mega-fields to sustain its 12 million b/d capacity

    Source: Saudi Aramco bond prospectus

    The Energy Information Administration, a U.S. government body that provides statistical information and often is used as a benchmark by the oil market, listed Ghawar’s production capacity at 5.8 million barrels a day in 2017. Aramco, in a presentation in Washington in 2004 when it tried to debunk the “peak oil” supply theories of the late U.S. oil banker Matt Simmons, also said the field was pumping more than 5 million barrels a day, and had been doing so since at least the previous decade.

    In his book “Twilight in the Desert,” Simmons argued that Saudi Arabia would struggle to boost production due to the imminent depletion of Ghawar, among other factors. “Field-by-field production reports disappeared behind a wall of secrecy over two decades ago,” he wrote in his book in reference to Aramco’s nationalization.

    The new details about Ghawar prove one of Simmons’s points but he missed other changes in technology that allowed Saudi Arabia — and, more importantly, U.S. shale producers — to boost output significantly, with global oil production yet to peak.

    Comment #1
    Ghawar field is not plateauing, it is way past that phase; it is in terminal decline but given the enormity of this super-giant field that decline will occur over, at the very minimum, a decade or two.

    The Saudis have been using assisted recovery with sea water injection in Ghawar for a long time trying to sustain and prolongate the production plateau phase.

    They started a few years ago to drill horizontal producer wells at the crest(s) of this monster structure and that, my friends, is a telltale sign of terminal decline: trying to maximize the recovery in the oil leg of the reservoir(s) while trying to stay away as long as possible from the rising water sweep of the water leg.

    Comment #2

    You are correct about failing fast. They have the ability to cut off laterals when the water cut gets too high. The reservoir, because of the extremely high permeability, produces pretty much like a tank of Oil on Water. When the crash comes, it will come very quickly.

    Keep in mind that the reserves at the top are less than at the bottom because the aerial extent shrinks.

    My comment:

    I believe Saudi screwed around far too long trying to squeeze maximum delivery for political and fundamentalist reasons.
    So much for “The State” managing natural resources.
    Definition of fascism. 1 often capitalized : a political philosophy, movement, or regime (such as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition.

    Saudi Arabia didn’t manage it’s ancient water,
    (belonging to the very distant past and no longer in existence) any better than its ancient oil.

  2. Robert Inget on Tue, 2nd Apr 2019 12:13 pm 

    So, OPEC stacks up like this;

    IOW’s OPEC is a dead man walking. Why?

    Neither the US or Saudi Arabia reached out to
    help Venezuela in its last two years of stress.
    Chinese, Russians saw this and jumped in with ‘captive loans’. Kept dolling out just enough funding so that an incompetent ex bus driver
    ran the richest country in South America into the ground.
    Now China, to a lesser extent Russia can ‘rebuild’ and take all the credit (and cash) as they have for

    The elephant in this hemisphere has to be US oil imports. Exactly where are they supposed to come from?

  3. Robert Inget on Tue, 2nd Apr 2019 12:24 pm 


  4. Robert Inget on Tue, 2nd Apr 2019 12:53 pm 

    My Point?

    #1 Venezuela, now the Jewel in Asia’s Crown.
    In the following decades Venezuela will be fought over in courts, land and sea, like no other treasure.

    Canada, #2 in world proven reserves will need to decide if it wants to build the pipelines making it possible to export Alberta’s oil sands to Asia.
    (I believe Canada will build ‘Canada East’ and ‘Trans-Mountain’ not because they want to but out of shear need.
    After-all, Asia in just a few years could soak-up every liter of available exportable oil on the planet

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