Page 4 - MEOG Week 04 2021

MEOG COMMENTARY MEOG

Aramco to proceed with

pipeline deal to save dividend

The oil giant is returning to talks to monetise its oil pipeline
assets as the company seeks to make up for a dip in revenues that

has caused issues in paying out its $18.75bn per quarter dividend.

SAUDI ARABIA HAVING tapped debt markets in November to previously discussed terms diminished amid MORE ON
secure $8bn to cover its latest $18.75bn dividend concern from the conservative Energy Minister OFFER:
payment, Saudi Aramco has returned to the Prince Abdulaziz bin Saud, with further due dil- In another move
WHAT: proposal to monetise its infrastructure assets as igence deemed necessary. illustrating Aramco’s
Aramco has returned it defers bidding on major upstream expansion While JPMorgan and Japan’s MUFG were urgency for cash, the
to the table on talks work. hired to advise on the deal, Aramco more firm’s chairman and
to lease out a stake in Aramco is understood to be proceeding with recently brought in Moelis & Co. for the same governor of the Public
its oil pipelines arm plans halted in Q4 2020 to cash in on its pipeline role and the transaction now appears to be near- Investment Fund (PIF)
which would see the business, with Brookfield Asset Management, ing closure. said this week that
company pay tariffs to KKR & Co. Apollo Global Management and the Aramco anticipates expressions of interest Aramco might consider
use the facilities over an Chinese state-backed Silk Road Fund thought to (EOIs) and hopes to receive non-binding offers selling more shares if
expected period of 25 be considering bidding. during February, according to sources spoken market conditions were
years. Middle East Oil & Gas (MEOG) understands to by Reuters last week, with China Investment appropriate.
that the deal would largely take the same form as Corp. also reported to have been courted by the
WHY: deals by Abu Dhabi National Oil Co. (ADNOC), oil firm.
Lower oil prices and with Aramco leasing out a stake in its pipeline A company source told MEOG that given
depressed demand have business for a period of 25 years and paying tar- the size of the transaction, the deal was likely to
taken a sizeable chunk iffs to use the infrastructure during that time. be financed through a syndicated loan and/or a
out of the company’s Aramco’s oil pipelines include the massive East- bond issuance linked to revenue from the assets.
cash flows and it has West Pipeline that is currently being upgraded Meanwhile, Reuters quoted sources as saying
already tapped debt to expand capacity from 5mn to 7mn barrels per that Aramco is set to take out a loan of $7.5bn,
markets. day (bpd). which will be offered to potential investors in its
In October, it was reported that BlackRock pipeline arm as it seeks to ensure it can pay its Q4
WHAT NEXT: was in talks to acquire the stake in what Aramco 2020 dividend of $18.75bn, with the company
Aramco is unlikely to dubbed internally ‘Project Seek’, with nego- having to dip into its coffers for the previous two
proceed with major tiations understood to have been carried out months to cover its shareholder obligations.
capital spending projects between Aramco and a group of local banks, In mid-2019, BlackRock and KKR leased a
in the current climate including Al-Ahli NCB, Al Rajhi, Riyad and 40% stake in ADNOC Oil Pipelines $4.9bn, with
and several tenders are Samba. ADNOC having leased out a 49% share in the
expected to be further MEOG learned back in Q4 that talks ADNOC Gas Pipelines to a consortium in June
delayed until well into Q2. cooled when appetite for an agreement under last year for $10.1bn.

P4 www. NEWSBASE .com Week 04 27•January•2021