DUBAI—Saudi Aramco made $111 billion in net income last year, according to rating agency Moody’s Investors Service, making the oil and gas firm the most profitable company in the world.
Moody’s and Fitch Ratings published snapshots of Aramco’s financials on Monday as they rated the oil firm ahead of a $10 billion Aramco bond sale expected for as soon as this week. Aramco plans to disclose financial statements for the first time via a bond prospectus, and use the issuance to help fund the acquisition of a stake in Saudi Arabia’s national petrochemicals firm.
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The firm generated net income of $111 billion last year, Moody’s said. By comparison, Apple Inc.’s equivalent profit was roughly $60 billion in its last full year; Amazon.com Inc. was $10 billion and Exxon Mobil Corp. was $21 billion.
State-owned Aramco posted those earnings numbers despite taxes of roughly 50% to the government, which is highly reliant on contributions from Aramco. Fitch estimates that from 2015-2017, Aramco accounted for around 70% of the country’s revenues.
Saudi Arabian Oil Co., as Aramco is officially known, has chosen banks including JPMorgan Chase & Co. and Morgan Stanley to manage its first debt offering and hold a roadshow beginning Monday in at least eight cities in the U.S., Europe and Asia, according to people familiar with the matter.
The financial information issued by the ratings firms is the first look under the hood at Aramco, whose financials have been a state secret since the once-American-run firm was nationalized in 1988.
Saudi Crown Prince Mohammed bin Salman is pushing the kingdom and its oil firm to become more financially transparent as part of his wider social and economic reform plan. Prince Mohammed wants to attract capital to the kingdom to diversify the oil-dependent economy and had planned to IPO Aramco in 2018. That process has since stalled due to valuation concerns among other factors, and officials have pivoted to a bond issuance.
The proceeds from the bond would be used for as a down payment on its $69.1 billion purchase of 70% of Saudi Basic Industries Corp., with the remainder of the acquisition paid in installments over time, The Wall Street Journal has reported. The ratings firms said Monday that installments would be paid up to 2021, according to their discussions with Aramco management.
Aramco is buying the 70% stake from Saudi Arabia’s sovereign-wealth fund, Public Investment Fund, which is expected to use the proceeds to drive Prince Mohammed’s agenda. The fund is developing new cities and entire industries in Saudi Arabia and has invested or committed nearly $100 billion to partnerships such as SoftBank Group Corp.’s Vision Fund and stakes in technology firms such as Uber Technologies Inc.
Fitch rated Aramco at A+, the fifth-highest investment grade level and the same as Saudi Arabia’s sovereign bonds. The firm also said it assessed the company’s stand-alone credit profile, ignoring sovereign-related risks, at AA+, or one notch above the level at which the Saudi government itself can raise debt.
Moody’s likewise rated Aramco A1, a similar level to Fitch, and noted that the oil firm’s ties to the government meant it couldn’t be assessed higher.
Exxon Mobil Corp. is rated AAA by Moody’s, its highest level.
“Saudi Aramco’s rating is constrained by the rating of the government of Saudi Arabia given the broad credit linkages between the two,” Moody’s said on Monday, adding that a sovereign credit upgrade or downgrade would impact Aramco’s rating.
Analysts have long waited to see Aramco’s financials and information about its reserves. In 2018, Aramco reported $355.9 billion in revenue and other income related to sales and $111.1 billion in net income, Moody’s said. Its operating profit, before interest, tax and depreciation, was $224 billion, Fitch said. The rating agency didn’t publish a net income figure.
Saudi Aramco also has a strong liquidity position, according to the ratings firms. As of year-end 2018, the company had $48.8 billion in cash compared with $27 billion of group debt.
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Fitch said it forecasts Saudi Aramco’s net debt rising to around $35 billion by 2021, after incorporating the Sabic transaction. Sabic will contribute around $8 billion a year to Aramco’s income from operations, Fitch said.
Saudi Aramco is the world’s largest oil producer by volume, Fitch said. The oil firm’s 2018 total hydrocarbon production averaged 13.6 million barrels of oil equivalent a day, including natural gas output, ahead of global and regional producers such as Abu Dhabi National Oil Company, Royal Dutch Shell PLC, Total SA and BP PLC, the ratings agency said.
Saudi Aramco estimates its proved liquids reserves at 227 billion barrels and its total hydrocarbon reserves at 257 billion barrels of oil equivalent.
Write to Rory Jones at rory.jones@wsj.com
https://www.wsj.com/articles/aramco-is-the-most-profitable-company-on-earth-ratings-agencies-say-11554102173
2019-04-01 07:45:00Z
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