ARAMCO GETS FIRST CREDIT RATINGS
Saudi state-owned firm secures ‘A+’ from Fitch and ‘A1’ from Moody’s
SAUDI Aramco, the world’s top oil producer, has been rated “A+” by Fitch Ratings and “A1” by Moody’s Investors Service in its first-ever credit ratings, ahead of the state oil giant’s first global bond sale and following last year’s earnings that dwarfed those of international oil majors.
Aramco will start meeting international bond investors this week for its debut in the international capital markets, opening its books to investor scrutiny for the first time. Given Aramco is fully state-owned, its ratings are in line with the credit rating of Saudi Arabia.
“Aramco has an extremely strong liquidity position,” said Moody’s.
As of the end of last year, it had US$48.8 billion (RM199.1 billion) in cash against US$27 billion in
reported debt, it said.
Aramco intends to issue its first US dollar-denominated bonds, expected to be for at least US$10 billion, after completing a bond “roadshow” this week.
It would meet with investors in Asia, Europe and the United States until Friday, according to a document issued by one of the banks leading the deal.
The debt sale will help it finance its acquisition of a stake in Saudi Basic Industries Corp (Sabic), the world’s fourthlargest petrochemicals maker.
At the end of last year, Aramco’s cash balances exceeded its balance-sheet debt, said Fitch.
“We project that 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 ,” said Fitch.
According to Moody’s, Aramco has US$46.8 billion of bank facilities, of which about US$25.5 billion remained available.
Credit ratings allow investors to compare and assess the credit quality of bond issuers and their debt securities, and are important in determining how much borrowers have to pay.
Aramco had hoped to match the ratings of ExxonMobil and Royal Dutch Shell, said a source.
Fitch’s “A+” rating for Aramco is one level below the “AA-” for both Shell and Total. ExxonMobil has a top “Aaa” rating from Moody’s Investors Service and a second-highest “AA+” from S&P Global Ratings.
“Aramco’s rating is constrained by that of Saudi Arabia (A+/stable). This reflects the influence the state exerts on the company through taxation and dividends, as well as regulating the level of production in line with Organisation of the Petroleum Exporting Countries’ commitments,” said Fitch, adding that it had put Aramco’s standalone credit profile at “AA+”.
“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, a vicepresident and senior credit officer at Moody’s.
Aramco was by far the world’s biggest oil producing company, ahead of regional peers like Abu Dhabi National Oil Company and listed oil majors Shell, Total and BP, said Fitch.
But it was “less integrated into natural gas and downstream than some of its international peers, such as Shell and Total, which makes it more exposed to oil prices although this is mitigated by low cost of production, its downstream expansion strategy, and the acquisition of Sabic.”
Aramco’s liquids production and total hydrocarbon production averaged 11.6 million and 13.6 million barrels of oil equivalent per day, respectively, last year, said Fitch.