Saudi Arabia’s national oil company Aramco plans to increase its debt to optimise the company’s capital structure, Bloomberg News has reported.
The company’s CFO, Ziad Al-Murshed, clarified that this shift is not directly linked to dividends but is aimed at achieving a lower weighted average cost of capital and expanding Aramco’s investor base. This strategy aligns with Saudi Arabia’s broader economic goals under its ‘Vision 2030’ initiative to diversify away from oil dependency.
“You’ll see us do a couple of things. One is just take on more debt compared to use of equity,” Al-Murshed said in an interview in Boston. “It’s nothing to do with the dividend, it is optimizing our capital structure so that we end up with a lower weighted average cost of capital.”
Aramco has been a significant contributor to Saudi Arabia’s fiscal health by paying substantial dividends to the state. This practice has helped manage the country’s fiscal deficit while the company has been increasing its debt levels.
In September, the company raised $3 billion through a two-part Islamic bond issuance, marking its second venture into the debt markets this year. Aramco anticipates declaring total dividends of $124.3 billion for 2024.
Earlier in July, Aramco raised $6 billion from a three-tranche bond sale, returning to the debt market after a three-year break since issuing a similar amount in Islamic bonds in 2021. Although debt sales are expected to be regular, Al-Murshed noted they would not be frequent, with no further debt sales planned for the remainder of 2024.
“We’re looking for it to be progressive over the years,” he said.
Earlier this year, the Saudi government sold a portion of the company, raising $12.35 billion.
