Saudi Aramco considers $10B pipeline stake sale to raise cash

Dinesh Nair and Matthew Martin March 30, 2020

LONDON (Bloomberg) - Saudi Aramco, the world’s largest oil producer, is weighing the sale of a stake in its pipeline unit to raise money amid a slump in crude prices, according to people familiar with the matter.

Aramco may need to raise cash this year as it confronts a historic rout in oil prices and a burgeoning list of spending obligations. The company has reaffirmed its commitment to pay out $75 billion in dividends this year and also needs to make the first installment for its $70 billion acquisition of a stake in chemicals producer Saudi Basic Industries Corp.

Aramco, the world’s most valuable publicly traded company after selling shares on the Riyadh exchange last year, could raise more than $10 billion from the sale, the people said, asking not to be identified as the information is private. Aramco has already held some preliminary discussions with potential advisers on the deal, but talks are still at an early stage and Aramco may decide against a sale, the people said.

Saudi Aramco didn’t immediately respond to requests to comment.

Aramco is ramping up oil supply at a time demand is falling off a cliff as travel restrictions are placed on people all around the world to stop the spread of coronavirus. The company has said it will keeping flooding the market with historic levels of oil at least through May, but the extra volume isn’t enough to compensate for the 67% drop in prices this year.

The crash has already caused Aramco to slash planned spending. Capital expenditure would be between $25 billion and $30 billion in 2020 and spending plans for next year and beyond are being reviewed. The oil giant is lowering that range from the planned $35 billion to $40 billion announced in its IPO prospectus.

Neighboring Abu Dhabi has already raised $4 billion from investors including KKR & Co. and BlackRock Inc. in a similar deal to the one Aramco is now considering.

Aramco Chairman Yasir Al-Rumayyan said last month that he was looking for ways to raise money from the company. “We have a lot of assets that could be monetized because they are non-core assets, which can improve the performance of the company,” he said in an interview with David Rubenstein, without giving further details.