Saudi Aramco Oil Company’s Chief Financial Officer, Ziyad Al-Murshed, said that his company intends to increase the debt-to-capital ratio, but this will not affect its quest to increase cash dividends.
Dividends
Bloomberg quoted the guide as saying in an interview in Boston yesterday: “We will do two things. The first is to increase the level of debt instead of relying on equity. This has nothing to do with dividends, but rather to improve the capital structure, to achieve the lowest possible average cost of capital.”
Aramco pays generous cash dividends to the state, its largest shareholder, by a large margin, and this has contributed to containing the Kingdom’s financial deficit.
Al-Murshid said that the company increased dividends by 4% in each of the past two years, and is now paying more than $81 billion in basic dividends, adding that he looks forward to more over the years and that the company’s free cash flow covers these dividends.
Debt market
Last September, Aramco raised $3 billion from the sale of sukuk in two tranches, the second time it headed to the debt instruments market this year, and the company is expected to announce a total cash dividend of $124.3 billion for 2024.
Aramco also raised 6 billion from the sale of bonds in 3 tranches last July, ending a 3-year hiatus from resorting to the debt instruments market after it issued bonds for the same amount in 2021.
The company has been absent from the debt markets since 2021, and the guide said that Aramco “had the luxury of waiting those three years until the market became favourable.”
He said that the operations of offering and selling debt instruments will be “regular, but not very frequent,” and added that Aramco does not intend to carry out any offering in the rest of this year.
He pointed out that expanding the company’s investor base will be one of the reasons for offering debt instruments.
Aramco has long been a major source of liquidity and cash flows for the kingdom, which is pumping billions of dollars to implement the 2030 economic vision aimed at reducing dependence on oil. But the decline in crude prices and production put pressure on Aramco’s profits.
The Saudi government sold a share of the company this year for $12.35 billion.
