The good news is that Saudi Aramco’s shares, which have been in the red for a long while, are finally springing to life, but only because the oil giant needs to pay its shareholders’ dividend pledge.
Most of the annual dividend payout of the $75 billion following last December’s IPO listing on Saudi Tadawul for 1.5% of its shares is going back to the government as majority shareholder, but Aramco needs $18.75 bn this quarter which exceeds Aramco’s current free cash flow.
Aramco goes to bond market
Saudi Aramco has hired a group of investment bankers to manage its multi-tranche US dollar-denominated bond issuance, hiring Goldman Sachs, Citi, HSBC, JPMorgan, Morgan Stanley, NCB Capital, and others, to arrange investor calls starting November 16, 2020, the company said in a filing on Tadawul.
A benchmark multi-tranche offering consisting of 3-, 5-, 10-, 30- and/or 50-year tranches will follow.
The bonds, which range from three to 50 years, are targeted to institutional investors with a minimum subscription of $200,000.
Earlier this month, Aramco reported a 44.6% plunge in third-quarter net profit as the pandemic continued to affect both demand and crude oil prices.
Higher average prices in Q3 this year at $43.60 a barrel, up from $23.40 in the prior period helped cushion painful margins in the refining and chemical businesses as well as lower production volumes.
Aramco’s third-quarter earnings of $11.8 bn showed a slight improvement from the first six months of the year but were still down nearly 45% compared to last year.
Total bond issuances from the Gulf region this year surpassed $100 bn and has already surpassed last year’s funds raising.
Selling oil below official prices
Aramco has repeatedly cut official selling prices to its big customers in Asia to try to maintain demand.
It decreased December pricing for shipments of Arab Light crude to Asia, its largest regional market, by 10 cents a barrel to a 50-cent discount to the benchmark.
Brent crude oil prices have rallied to just over $44 today on news of successful COVID-19 vaccine trials and hopes of making their way to market soon but had dropped around 10% last week as European nations including Germany and France announced new lockdowns and daily virus cases hit a record in the U.S.
Brent will probably continue ranging between $38 and $43 a barrel, according to Ibrahim Al-Buainain, head of Aramco’s trading unit.
Aramco cut prices for all U.S. grades by 20 cents and raised them by as much as $1 for northwest Europe and the Mediterranean. The company shipped almost two-thirds of its oil exports last month to Asia or the U.S., tanker-tracking data compiled by Bloomberg show.
OPEC+ is considering keeping production at current levels into 2021 instead of easing the supply cuts at the start of January, as was originally planned.
The producers’ group will meet on Nov. 30-Dec. 1 to review its output policy.
Aramco made its then-record-breaking debut on the stock market last December and shares rose to 35.2 Saudi Riyals from 32, pre-listing.
Saudi Aramco’s shares climbed 1% and were in the green zone at 34.4 riyals after having been in the red since the beginning of the year by 2.3%.