Saudi Aramco taps debt markets for second dollar-bond sale in 2024
Oil producer is set to pay out $124b in dividends this year, including a special payout
Saudi Arabia's state-run oil behemoth started the sale of a second round of international bonds just two months after it raised $6 billion, the latest deal in the kingdom's debt spree this year.
Saudi Aramco has mandated banks for the latest dollar-denominated sukuk bonds, according to a statement on the Saudi stock exchange. Sukuk are securities compliant with Islamic rules.
The Saudi government and state-linked companies have been borrowing heavily as the country looks to fund projects in Crown Prince Mohammed Bin Salman's ambitious economic diversification push. Aramco plays a key role in those plans as the state relies heavily on the company's dividends to help cover an expected budget deficit.
Aramco's dollar-debt sale in July, its first in three years, drew strong demand with final order books topping $23 billion. The oil producer also sold 40-year bonds that month and was likely to use the funds to refinance existing borrowings and contribute to its investment program.
Lower oil production and prices this year have hit Aramco's profit. Brent crude is down about 3 per cent so far this year, trading near $75 a barrel on concern sluggish demand in China won't be enough to absorb new output. OPEC+, the producers' group Saudi Arabia leads along with countries like Russia, has been restricting its own output to support the market.
Aramco is set to pay out $124 billion in dividends this year, including a special payout. The total distributions over the last couple of quarters have exceeded the company's free cash flow, indicating that Aramco would need to sell more debt to maintain the dividend at current levels.
Aramco appointed Al Rajhi Bank, Citigroup Inc., JPMorgan Chase & Co. and Standard Chartered Plc, among others, as bookrunners for the sale, according to the statement.