Saudi Aramco leapfrogs Apple to claim title as world's most profitable firm

Saudi Aramco leapfrogs Apple to claim title as world's most profitable firm

It handily beat Apple ($59.5 billion in net income in 2018) and Alphabet, the parent company of Google ($30.7 billion), and ran laps around other oil companies like Royal Dutch Shell ($23.9 billion) and Exxon Mobil ($20.8 billion). The Kingdom's oil minister has said the bond would be around $10 billion in size. By comparison, ExxonMobil, which is the largest listed company in the world, made earnings before interest, tax and other adjustments of $50bn a year ago.

"Saudi Aramco benefits from a very large operational scale, significant downstream integration and strong financial flexibility given its low cost structure and robust balance sheet", Moody's said. Aramco will be buying the stake from Saudi Arabia's sovereign wealth fund, whose chairman is Crown Prince Mohammed bin Salman.

They provide investors with the first publicly available set of data to assess the possible value of a once-in-a-generation deal for financial markets: Aramco's proposed initial public offering, originally targeted for 2018 but previous year delayed until 2021.

The kingdom's dependence on the company to finance social and military spending, as well as the lavish lifestyles of hundreds of princes, places a heavy burden on Aramco'scash flow. Saudi Aramco produced approximately one in every eight barrels of crude oil produced globally from 2016 to 2018, according to the prospectus.

According to data from rating agencies Fitch and Moody's, the oil giant does not match up to its global counterparts in terms of cash generated per barrel. Fitch's A-plus rating for Aramco is higher than that of Shell, BP and Total.

It comes as Aramco prepares to sell bonds on the worldwide market to help finance the purchase of a 70% stake in Saudi petrochemical behemoth SABIC for $69.1 billion, effectively merging the kingdom's two largest companies.

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"Over time, a low oil price environment could cause a sustained fiscal deficit for Saudi Arabia that could result in changes down the line for Aramco's fiscal regime", said Neil Beveridge, an energy analyst with Sanford C. Bernstein & Co.in Hong Kong. Exxon reported cash flow previous year of $36 billion.

Oil prices were boosted last year after Saudi led efforts at an OPEC+ meeting secured supply cuts in an attempt to improve languishing prices by taking approximately 1.2 million barrels a day out of the market.

Fitch's A+ rating for Aramco is one level below the AA- for both Shell and Total. "We project that Saudi Aramco's leverage will remain low, even after the recently announced acquisition of Sabic, which we expect to be predominantly funded from the company's free cash flow", it said. Aramco picked banks including JPMorgan Chase & Co. and Morgan Stanley to manage the debt offering.

Aramco obtained credit ratings of A1 by Moody's and A+ by Fitch ahead of the planned bond.

But accounts published before the firm's debut in the worldwide bond market also show Aramco - an organization that produces about 10 percent of the world's crude - doesn't generate as much cash per barrel as other leading oil companies like Royal Dutch Shell Plc because of a heavy tax burden.

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