Published: Tue, April 02, 2019
Markets | By Otis Pena

Aramco flashes its cash but also its independence

Aramco flashes its cash but also its independence

Saudi Aramco was the world's most profitable company in 2018, beating the earnings of corporate giants Apple and Google, as it shared for the first time its financial performance to rating agencies ahead of its debut worldwide bond.

Despite being largely on par with other oil firms, with considerably lower debts than many of its rivals, Aramco was marked down for its links to the Saudi regime, the agencies said.

By comparison, Royal Dutch Shell, the largest publicly traded oil company, made $23.4 billion, while ExxonMobil, the largest United States oil company, made $20.8 billion in 2018.

Saudi Arabia's huge state oil business has established itself as the most profitable company in the world by reporting net income of $111 billion for 2018.

As part of the bond issue ratings agencies Fitch and Moody's released their first scores for the company.

Aramco is still by far the world's biggest oil producing company, ahead of regional peers like Abu Dhabi National Oil Company (ADNOC) and listed oil majors Shell, Total and BP, Fitch said. Aramco pays 50 percent of its profit on income tax, plus a sliding royalty scale that starts at 20 percent of the company's revenue.

Aramco's chief executive, Amin Nasser, has said that the company is pursuing worldwide acquisitions in areas like liquefied natural gas, a chilled fuel that can be transported globally on ships like oil.

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Saudi Arabia's state-owned oil giant blows the rest of the world out of the water with its gargantuan profits.

Fitch said Aramco accounted for around 70 percent of the Saudi government's budget revenue between 2015-2017, but it wasn't immediately clear if that figure included the dividends mentioned by Moody's.

"In 2018, its (Aramco's) liquids production and its total hydrocarbon production averaged 11.6 million and 13.6 million barrels of oil equivalent per day, respectively", Fitch said. Exxon reported cash flow past year of $36 billion.

"Funds from operations, which is operation cash flows before working capital changes, is the best measure to compare oil companies' profitability, since Ebitda does not take into account taxation", Dmitry Marinchenko, senior director at Fitch in London, said in an interview.

The company will hold meetings with investors in coming days in cities including London, New York, Boston, Singapore, Hong Kong, Tokyo, Los Angeles and Chicago. They are joined by Citigroup, Goldman Sachs, HSBC and NCB Capital as bookrunners.

Moody's said Aramco paid $US58.2 billion in dividends in 2018 and $US50.4 billion in 2017.

Previously reluctant to disclose its financials, Aramco had to reveal them in order to obtain a public rating and start issuing global bonds. Yet his ambition to secure a $2 trillion valuation has faced push back from global investors, prompting a delay in the IPO. "The final rating is however constrained by the government of Saudi Arabia's A1 rating because of the close interlinkages between the sovereign and the company".

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