Saudi Aramco raises $3 billion in sukuk to maintain dividends

Saudi Aramco has raised $3 billion via a sukuk issue, despite a drop in oil production. The funds raised are intended to support the company's dividend commitments and capital expenditure projects.

Share:

Comprehensive energy news coverage, updated nonstop

Annual subscription

8.25€/month*

*billed annually at 99€/year for the first year then 149,00€/year ​

Unlimited access • Archives included • Professional invoice

OTHER ACCESS OPTIONS

Monthly subscription

Unlimited access • Archives included

5.2€/month*
then 14.90€ per month thereafter

FREE ACCOUNT

3 articles offered per month

FREE

*Prices are excluding VAT, which may vary depending on your location or professional status

Since 2021: 35,000 articles • 150+ analyses per week

Saudi Aramco launches a new debt issue on the markets, raising $3 billion through sukuk.
The company is turning to the bond market for the second time in 2024, having raised $6 billion in July.
This comes as the company plans to pay out a colossal $124.3 billion in dividends for the current year.
The sukuk issue comprises two tranches: $1.5 billion with a five-year maturity, and $1.5 billion with a ten-year maturity, with respective spreads of 85 and 100 basis points over US Treasuries.
The purpose of this facility is clear: to compensate for the decline in cash flow generated by oil activities, affected by the production restrictions put in place by OPEC+. These restrictions, designed to maintain crude oil prices, limit Aramco’s ability to operate at full capacity.
As a result, the company is operating at around 25% below its maximum capacity, reducing its oil revenues.

Impact of lower oil prices on Aramco

The global oil situation remains a challenge for Saudi Aramco.
Oil prices, although supported by OPEC+ efforts, have not returned to expected levels.
This volatility, combined with production restrictions, has a direct impact on the company’s profitability.
Aramco continues to post solid earnings, but its liquidity requirements are growing to support its financial commitments, notably to the Saudi government, its main shareholder with an 81.5% stake, as well as the Public Investment Fund (PIF).
The dividends to be paid for 2024, which exceed $124 billion, represent a major strategic challenge for the company and for the Saudi economy as a whole.
They are used to finance the flagship projects of the Vision 2030 plan, which aims to diversify the Saudi economy beyond oil.
However, this high-dividend strategy is putting a strain on the company’s cash position, which is already under pressure from falling crude prices and production cuts.

Adjustment strategy in the face of market challenges

The sukuk issue demonstrates Aramco’s desire to diversify its sources of financing, turning to Islamic-compliant bonds to attract regional and international investors.
This approach enables the company to maintain financial flexibility in a global context marked by uncertainty.
However, the company’s increasing debt levels also indicate a growing dependence on financial markets to maintain its operations and meet its commitments to shareholders.
Monica Malik, Chief Economist at Abu Dhabi Commercial Bank, observes that Aramco’s additional borrowings in 2024 directly reflect the need to cover dividend payments, while cash flows generated by operations are no longer sufficient to finance them.
Capital expenditure, necessary to support the company’s future growth and meet the requirements of the Vision 2030 plan, is also adding to short-term liquidity needs.

Consequences of OPEC+ decisions and future prospects

Decisions taken by OPEC+, which is de facto led by Saudi Arabia, continue to have a direct impact on Aramco’s ability to generate revenues.
By limiting production, OPEC+ is seeking to stabilize oil prices, but this means that Aramco must reduce its activity on a scale that significantly affects its margins.
These oil policy choices, while essential to support world prices, weigh heavily on the company’s short-term prospects.
Aramco also faces internal challenges in managing its investments and financial priorities.
Although recently issued sukuk bonds have attracted strong demand, reflecting investor confidence in the company’s strength, frequent recourse to debt could become a concern if oil market conditions do not improve.
The company will have to adjust its strategies in line with price fluctuations and uncertainties related to global oil demand.
In the long term, Saudi Aramco’s strategy is based on a delicate balance between maintaining high dividends to support the Saudi economy, and prudent management of its investments and debt.
In a market marked by persistent volatility, the company will need to remain agile to meet shareholder expectations, while navigating a constantly changing global economic environment.

The Indian refiner segments campaigns, strengthens documentary traceability and adjusts contracts to secure certified shipments to the European Union, while redirecting ineligible volumes to Africa and the Americas based on market conditions.
Gran Tierra Energy has signed a crude oil sale agreement with a $200mn prepayment and amended its Colombian credit facility to improve financial flexibility.
Operations at BP’s 440,000 barrel-per-day Whiting refinery have resumed following a temporary shutdown caused by a power outage and a minor fire incident.
The European Union targets a trading subsidiary and a refinery linked to China National Petroleum Corporation, tightening access to financial and insurance services without disrupting pipeline deliveries, with reallocations expected in settlements, insurance, and logistics. —
Viktor Orban says he is working to bypass recent US sanctions targeting Rosneft and Lukoil, underscoring Hungary’s continued reliance on Russian hydrocarbons.
Traceability requirements from the EU (European Union) on fuel origin are reshaping Indian refined flows, with a shift toward Africa and Brazil supported by local premiums and a decline in Russian exports.
U.S. sanctions targeting Rosneft and Lukoil trigger a rebound in oil, while the European Union prepares a clampdown on liquefied natural gas and maritime logistics, with immediate repercussions for markets and Russia’s export chain.
Ten days before COP30, Brazil awarded five offshore oil blocks for over $19mn, confirming its deepwater development strategy despite environmental criticism.
Tripoli mise sur des partenariats avec des majors et jusqu’à 4 milliards $ d’investissements pour relancer sa production pétrolière, malgré un climat politique divisé.
Niger hardens its stance on energy sovereignty but avoids breaking with China National Petroleum Corporation, its main oil industry partner, in order to safeguard export revenues.
As Brent hovers near $60, growing opacity around OPEC’s output restrains a steeper decline in crude prices amid surplus warnings by the International Energy Agency.
Portuguese energy group Galp plans to finalise a strategic partnership for its offshore oil project Mopane in Namibia before the end of the year.
A traditional leader from the Niger Delta is seeking compensation before Shell’s onshore asset sale, citing decades of unaddressed pollution in his kingdom.
The Oxford Energy Institute study shows that signals from weekly positions and the Brent/WTI curve now favor contrarian strategies, in a market constrained by regulation and logistics affected by international sanctions. —
Russian company Russneft has shipped its first oil cargo to Georgia’s newly launched Kulevi refinery, despite the absence of formal diplomatic ties between Moscow and Tbilisi.
New Stratus Energy has signed a definitive agreement with Vultur Oil to acquire up to 32.5% interest in two onshore oil blocks located in the State of Bahia, Brazil, with an initial investment of $10mn.
Clearview Resources has completed the sale of all its shares to a listed oil company, exiting Canadian financial markets following shareholder and court approval.
The Brazilian government has approved an offshore drilling project led by Petrobras in the Equatorial Margin region, weeks before COP30 in Belém.
In Taft, a historic stronghold of black gold, Donald Trump's return to the presidency reopens the issue of California's restrictions on oil production and fuels renewed optimism among industry stakeholders.
Vantage Drilling halted a 260-day drilling contract for the vessel Platinum Explorer following a rapid evolution of international sanctions regimes that made the campaign non-compliant with the applicable legal framework shortly after it was signed.

All the latest energy news, all the time

Annual subscription

8.25€/month*

*billed annually at 99€/year for the first year then 149,00€/year ​

Unlimited access - Archives included - Pro invoice

Monthly subscription

Unlimited access • Archives included

5.2€/month*
then 14.90€ per month thereafter

*Prices shown are exclusive of VAT, which may vary according to your location or professional status.

Since 2021: 30,000 articles - +150 analyses/week.