Saudi Aramco, the world’s top oil producer, has been rated A+ by Fitch and A1 by Moody’s in its first-ever credit ratings, ahead of the state oil giant’s first global bond sale and following 2018 earnings that dwarfed those of international oil majors, Reuters reported.
The first official glimpse of Saudi Aramco’s financial performance confirms the state-run oil giant can generate profit like no other company on Earth: net income last year was $111.1 billion, easily outstripping U.S. behemoths including Apple Inc. and Exxon Mobil Corp, Bloomberg noted.
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 generated earnings before interest, tax and depreciation (EBITDA) of $224 billion in 2018, Fitch said on Monday, surpassing ExxonMobil, the world’s largest listed oil firm.
“Saudi Aramco has an extremely strong liquidity position,” Moody’s said. As of the end of 2018, it had $48.8 billion in cash against $27 billion in reported debt, it said.
Aramco intends to issue its first U.S. dollar-denominated bonds, expected to be for at least $10 billion, after completing a bond “roadshow” this week.
It will meet with investors in Asia, Europe and the United States through until Friday, April 5, ahead of a multi-tranche dollar bond, according to a document issued by one of the banks leading the deal and seen by Reuters.
Last week, Aramco said it would buy a 70 percent stake in Saudi Basic Industries Corp (SABIC) from the kingdom’s wealth fund for $69.1 billion, in one of the biggest deals in the global chemical industry, Reuters adds.
At the end of 2018, Aramco’s cash balances exceeded its balance-sheet debt, Fitch said.
“The company’s balance sheet leverage has been conservatively managed,” said Moody’s on Monday.
According to Moody’s, Aramco has $46.8 billion of bank facilities, of which about $25.5 billion remains available.
“We project that Saudi 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 (FCF),” Fitch said.
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 has hoped to match the ratings of Exxon and Royal Dutch Shell, a source familiar with the matter has told Reuters. Exxon is rated triple-A by Moody’s and AA+ by its rival S&P, putting it on par with the rating of the United States.