Saudi Aramco, the world’s biggest crude oil exporter and the Saudi state-owned oil giant, is back tapping the debt markets this year with an offering of dollar-denominated Islamic bonds, Bloomberg reported on Wednesday, citing a source with knowledge of the plans.
Aramco is said to be offering Islamic bonds, the so-called sukuk, in five and ten-year issuances in what would be the Saudi oil firm’s second debt issue this year and Saudi Arabia’s third in one week.
In May, Saudi Aramco issued a total of $5 billion in five, ten, and 30-year bonds, in U.S.-dollar denominated international bonds under its Global Medium Term Note Programme.
Lower oil prices have reduced Aramco’s cash flows in the first quarter of the year, and the second quarter showed even larger declines in cash flow and profits as prices slumped.
At the end of last year, Aramco slashed its performance-linked dividend as oil prices fell from the 2022 and 2023 highs, and Aramco struggled to pay with the cash flow the huge dividends to its shareholders, the biggest of which with over 90% is the Kingdom of Saudi Arabia.
Aramco plans to continue tapping the debt markets for more borrowings to fund growth, CEO Amin Nasser told Bloomberg TV in May after the world’s biggest oil firm issued the $5 billion bond.
Now Aramco prepares another bond issue, per Bloomberg’s source in the know.
The issue would be the third for Saudi Arabia in just a week after the Kingdom last week sold $5.5 billion in Islamic bonds, orders for which hit $17.5 billion, and the sovereign wealth fund, the Public Investment Fund (PIF), sold earlier this week $2 billion of 10-year dollar bonds to fund part of its investment plans.
The busy bond issuance from Saudi Arabia in recent weeks suggests that the decline in oil prices this year is straining the Kingdom’s finances. Saudi Arabia’s budget deficit is growing this year as oil prices are down from last year’s levels and well below the $90 per-barrel price the Kingdom is estimated to need to balance its budget.
By Michael Kern for Oilprice.com
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