Energy giant Aramco to issue longer term bonds this year, CFO tells Saudi Capital Market Forum in Riyadh

“We have been active [in issuing bonds] in the past,” he said. “There was a period of inactivity because the markets were not stable. Now the markets are becoming more stable, so you can expect us to be active.”

Aramco will prioritise longer term over short-term bonds for the issuance, which is likely to take place this year, he added.

“What we’re trying to do is optimise our capital structure,” Al-Murshed said. “Overall, we’re in a significant net-cash position. What we’re trying to do is get to a more optimum capital structure, which means considerably more debt, but we look at this over the cycle and not just year by year.”

Al-Murshed pointed out that “it’s not good to borrow to pay dividends”, and that the company is “extremely fiscally disciplined” when it comes to funding capital programme opportunities.

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Aramco’s dividends structure currently consists of a base dividend and a performance-linked dividend. The base dividend grows progressively each year and is determined by what the company thinks is sustainable in the long run.

As of last year, Aramco’s base dividend payment to shareholders grew by 4 per cent to US$78 billion, Al-Murshed said.

The performance-linked dividend, introduced in the third quarter of 2023, is determined by free cash flow instead of operating cash flow, which means the company is “prioritising growth”, the CFO added.

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When asked about reports of a potential follow-on share sale that could help the company raise about US$20 billion, Al-Murshed said he could not comment on the decision as it would be a sale of “existing government shares”. The location of such a listing would also be up to the government, he added.

Hong Kong has been vying for a second listing by the energy giant. Aramco raised US$25.6 billion by selling three billion shares on the Saudi stock exchange in the world’s largest initial public offering in 2019.

The Saudi government is Aramco’s largest shareholder, directly owning 90 per cent of the company. An additional 8 per cent stake is held by the Public Investment Fund (PIF), the country’s sovereign wealth fund, which was also the world’s top-spending state investor in 2023.

When asked about supply and demand of oil and impact on prices, Al-Murshed said while there is “sufficient supply” in the market right now, demand has also recovered since last year and he expects to see “considerable growth” this year.

“Our job is not to target a certain oil price. Our job is to be able to manoeuvre safely and thrive in whatever oil price that is out there,” he said.

The CFO also revealed that a target price of US$60 is “well above” its costs, and that Aramco is “prepared for different ranges of oil prices”.