Saudi Aramco buys SABIC in $70bn chemicals deal

Saudi Aramco buys SABIC in $70bn chemicals deal

Saudi Aramco bagged the whopping $111 billion of net income a year ago, buoyed by the rising price of oil, but the reason we are learning this is that the government of Saudi Arabia wants to list the oil giant on a public stock exchange for the first time.

While that figure is notable alone, it's even more staggering given Apple made US$59.4 billion over the same period. The company, which began as a United States (US) venture with a concession for oil rights in Saudi Arabia, was fully acquired by the Saudi government in 1980.

Moody's said Aramco paid USD58.2 billion in dividends in 2018 and USD50.4 billion in 2017. Previously, Saudi Aramco's accounts had remained mostly secret since the company was nationalized in the 1970s. "You can't disassociate the sovereign government from Aramco given the very close relationship and the contribution Aramco makes to the overall funding for Saudi Arabia".

"Saudi Aramco has many characteristics of a Aaa-rated corporate, with minimal debt relative to cash flows, large scale of production, market leadership and access in Saudi Arabia to one of the world's largest hydrocarbon reserves", said Rehan Akbar, vice president - senior credit officer at Moody's. Such moves are a part of an attempt by Saudi Arabia lessen the government's dependence on oil and to create new income streams.

However, both Fitch and Moody's gave state-owned Aramco a credit rating of just A+ and A1 respectively, with a stable outlook, since the majority of its revenue is taken by the government to finance its ever-increasing spending. "Especially, Fitch noted" the influence the nation has on the company through regulating the degree of production, taxation and dividends".

Ethiopian report says faulty sensor data led to jet crash
Investigators found that software on that plane took readings from the sensor and pointed the nose down. Stumo was also the niece of Ralph Nader, the former presidential candidate and consumer rights advocate.

The SABIC deal will be completed in 2020, Aramco said separately in the prospectus, adding it will fund half of the acquisition with promissory notes issued to the PIF.

The company was originally due to list a 5% stake, which Crown Prince Mohammed bin Salman hoped would fetch $100bn for PIF, giving it far more room to pursue his diversification strategy.

The ratings agencies issued their reports on the same day that Aramco said it will start to meet with investors about selling its bonds which, if issued, would be priced in dollars and traded on the London Stock Exchange.

"Fluctuations in the price at which the company is able to sell crude oil could cause the company's results of operations and cash flow to vary significantly", Aramco said.

Related Articles