Aramco: 31.3% return on invested capital..“SABIC” deal ‎payment to PIF reduces indebtedness to 7.9%‎

Saudi Aramco revealed an increase in the return on average invested capital by 31.3% during the second quarter and the first half as a whole, compared to 16.7% for the same two periods of 2021, which reflected the rise in crude oil prices and quantities sold, and the improvement in the profit margins of the refining and processing sector and marketing.

The company continues to strengthen its financial position to maintain a high credit rating for investment in various market cycles. Indebtedness decreased to 7.9% on June 30, 2022, compared to 14.2% on December 31, 2021, primarily due to higher operating cash flows, due to strong profits and improved profit margins in the downstream sector.

Moreover, the company continues to improve financing costs as a partial down payment was made to the Public Investment Fund from the debt related to the acquisition of a 70% stake in SABIC in 2020. This reduced the original amount of the outstanding warrants by SR 45 billion ($12 billion), in addition to the reduction of SR 30 billion Saudi ($8 billion) in the first quarter of 2022.

Saudi Aramco acquired the Public Investment Fund’s 70% stake in SABIC at a value of SR 259.125 billion ($69.1 billion), equivalent to 123.39 riyals per share.

According to the agreement, the amount of the deal will be paid in 9 installments, and the third installment of the acquisition became due, before last April 7, at a value of $8.5 billion, in addition to $500 million in financing costs, and $3 billion in advance payment, bringing the total to $12 billion. Equivalent to 45 billion riyals.

Amin Al-Nasser stated that the company paid about SR 67 billion of dues to acquire the Public Investment Fund’s share in SABIC ahead of time to reduce financing costs.

According to what was agreed, the purchase price will be paid through payment orders in accordance with the seller’s loan provided by the Public Investment Fund, where the maturity of the payment orders began between August 2, 2020 (the first payment) and April 7, 2028 (which is the last payment). ‎

The date of payments is as follows:

First: On or before August 2, 2020, an amount equal to $7 billion.

Second: On or before April 7, 2021, an amount equal to $5 billion.

Third: On or before April 7, 2022, an amount equal to $8.5 billion plus financing fees of $500 million.

These three payments have already been paid in the remaining 6 payments, starting from the next year 2023 until the year 2028, and these payments represent the fourth to the ninth, where the other two payments are considered financing fees amounting to a total of $2 billion, and the remaining payments are as follows:

Fourth: On or before April 7, 2023, an amount equal to $10.5 billion plus financing charges of $500 million.

Fifth: On or before April 7, 2024, an amount equal to $10.5 billion plus financing charges of $600 million.

Sixth: On or before April 7, 2025, an amount equal to $10.5 billion plus financing charges of $800 million.

Seventh: On or before April 7, 2026, an amount equal to $17.1 billion plus a financing fee of $1.5 billion.

Eighth: On or before April 7, 2027, financing fees of $1 billion.

Ninth: On or before April 7, 2028, financing charges of $1 billion.

On the other hand, Saudi Aramco announced dividends amounting to SR 70.3 billion Saudi ($18.8 billion) for the second quarter, to be paid during the third quarter of this year 2022, in addition to what was previously disclosed in the annual report for 2021, The company distributed bonus shares to shareholders during the second quarter of 2022, at the rate of one free share for every ten shares owned. The company aims to maintain sustainable and increasing dividends, in line with future aspirations and core financial results.

Capital expenditures increased by 25% to SAR35.1 billion (US$9.4 billion) in the second quarter, and by 8% to SAR63.5 billion (US$16.9 billion) in the first half of 2022, compared to the same periods in the same period. In 2021, Saudi Aramco will continue to explore investments to seize growth opportunities, make progress in the strategic integration of exploration and production, downstream and marketing, expand its chemicals business, and develop opportunities in low-carbon businesses.

Saudi Aramco achieved a record quarterly and semi-annual net income of 181.6 billion Saudi riyals ($48.4 billion) in the second quarter and 329.7 billion Saudi riyals (87.9 billion dollars) in the first half of 2022, compared to 95.5 billion Saudi riyals ($25.5 billion) and 176.9 billion Saudi riyals ($47.2 billion), respectively, for the same two periods of 2021. This increase in these two periods came primarily as a result of the rise in crude oil prices, and quantities Sold, along with strong refining margins in the second quarter and higher downstream margins in the first half of 2022.