RIYADH: According to the company’s chief financial officer, Saudi Aramco intends to raise borrowing and concentrate on improving its dividend distribution strategy. Ziad Al-Murshed clarified in a Bloomberg interview that the company is making this change as part of its capital structure optimization initiatives. With operations ranging from the extraction of hydrocarbons to the production of energy, as well as refining and commercial distribution, Aramco is regarded as one of the mainstays of the Saudi economy.
“We’ll do a few things for you to see. First, simply take on additional debt rather than using equity,” Al-Murshed stated in the interview. He continued, “It has nothing to do with the dividend; it’s about optimizing our capital structure to get a lower weighted average cost of capital.” After a three-year break, Aramco made its debt market comeback earlier this year with two distinct issuances totaling $9 billion. It began issuing $6 billion in dollar-denominated bonds in June, then in September it issued $3 billion in Islamic bonds.
We had the luxury of waiting out those three years till the market improved, the CFO observed. Al-Murshed explained how the business has raised its payout by 4% in the last two years and is currently disbursing base payments totaling more than $81 billion. He stated that the company’s free cash flow supports this strategy and that “we’re looking for it to be progressive over the years.”
Al-Murshed disclosed that Aramco has no plans to sell further debt for the rest of 2024, even though the business intends to issue debt on a regular basis. However, he stressed that this will not be too frequent.
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