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Saudi Aramco raised USD 4 bnin its first international debt offering of the year, in a four-tranche bond that was heavily oversubscribed by international investors. The oil giant tightened pricing after drawing in over USD 22 bn in orders, a sign of confidence as the company’s free cashflow continues to face pressure from lower oil prices.
This marks the third time the oil giant has tapped the debt markets in nine months, including a USD 3 bn sukuk in September and a USD 5 bn conventional bond in May.
Why it matters
Aramco is shoring up its coffers in a bid to defend base payouts and back growth plans. Total dividends for 2025 are now expected to land around USD 85.4 bn, some 30% y-o-y decline from 2024, as performance-linked dividends are all but scrapped. It also has a massive capex program ahead, after raising its 2030 gas production capacity growth target in November to some 80% above 2021 levels.
The balance sheet allows it (for now): Net debt dipped by the end of the quarter for the first time since 2Q 2023, while the gearing ratio — an indicator of borrowing levels — slightly eased to 6.3%, allowing the company ample room to continue borrowing. Free cashflow also recovered nicely in 3Q, covering the over USD 21 bn dividends slated for the quarter, albeit with a thin USD 2.2 bn margin that doesn’t offer much breathing room.
It’s not just debt: Aramco has also been pulling other levers, including leaning on creative financing like last year’s USD 11 bn leaseback deal for its Jafurah gas facilities with BlackRock-backed GIP. The company is also cutting costs and reportedly looking to divest gas plants in a USD 4 bn agreement.
About the bond
The offering comprised four tranches across three, five, 10, and 30-year maturities. The strength of the order book allowed Aramco to significantly tighten spreads, with the 3-year tranche priced at just 60 bps over US Treasuries (down from 100 bps guidance), while the 30-year landed at 130 bps.
ADVISORS- Our friends at HSBC are acting as active joint bookrunners alongside Citi, Goldman Sachs International, JP Morgan, and Morgan Stanley. Meanwhile, Abu Dhabi Commercial Bank, Bank of China, BofA Securities, BSF Capital, Emirates NBD Capital, First Abu Dhabi Bank, Mizuho, MUFG, Natixis, Riyad Capital, SMBC, and Standard Chartered are passive joint bookrunners.
