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 international bond issue debut.
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 said that without sovereign rating constraints, Aramco would be in the same league as better-rated international oil companies such as 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 offering in 2021, expected to generate $100 billion.
Aramco will start meeting international bond investors this week for the much-anticipated debt transaction.