DUBAI, Apr 01 (Reuters): Saudi Aramco, the world's biggest oil producer, made core earnings of $224 billion last year, almost three times as much as Apple, figures from the state-owned company showed on Monday ahead of its debut international bond issue.
Previously reluctant to disclose its financials, Aramco had to reveal them in order to obtain a public rating and start issuing public international bonds.
Despite the huge profit, the state-owned oil giant was rated by credit agencies at par with Saudi Arabia, meaning the kingdom's sluggish economy will weigh on Aramco's cost of borrowing as it prepares its bond market debut.
Saudi energy minister Khalid al-Falih said earlier this year the planned bond sale would raise around $10 billion, but banking sources said the transaction could be larger.
Rating agencies Fitch and Moody's rated Aramco A+ and A1 respectively, but both said that without sovereign rating constraints Aramco would be in the same league as better-rated international oil companies like Exxon Mobil, Chevron and Shell.
"Saudi Aramco's rating is constrained by that of Saudi Arabia (A+/Stable)," Fitch said. "This reflects the influence the state exerts on the company through taxation and dividends, as well as regulating the level of production in line with its OPEC commitments."
Fitch put Aramco's standalone credit profile at "AA+".
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.
The planned bond deal is Aramco's inaugural transaction in international markets. It still plans to launch an initial public stock offering or IPO in 2021, expected to generate $100 billion, having postponed its flotation from 2018.
"Saudi Aramco has many characteristics of a Aaa-rated corporate, with minimal debt relative to cash flows, large scale of production, market leadership and access in Saudi Arabia to one of the world's largest hydrocarbon reserves," said Rehan Akbar, senior credit officer at Moody's.
The group has 257 billion barrels of oil equivalent, representing over 50 years of reserves based on current production levels, according to a company presentation given to investors and seen by Reuters.
Aramco will start meeting international bond investors this week for the much anticipated debt transaction, expected to attract hefty demand from global investors.
Meanwhile, Oil rose on Monday, building on its largest first-quarter gains in nearly a decade, as tight supply and positive signs for the global economy supported prices.
Brent crude for June delivery was up 96 cents, or 1.42 per cent, at $68.54 a barrel by 0900 GMT, having risen 27 per cent in the January-March period. US West Texas Intermediate futures rose 56 cents, or 0.93 per cent, to $60.70 a barrel, after gaining 32 per cent in the first quarter.
Positive Chinese factory gauges and signs of progress in Sino-US trade talks have boosted sentiment, helping to buoy regional stock markets.
"Oil continues to move higher, with risk appetite on the rise in global markets," BNP Paribas strategist Harry Tchilinguirian told the Reuters Global Oil Forum.
The United States and China said they made progress in trade talks that concluded on Friday in Beijing, with Washington saying the negotiations were "candid and constructive" as the world's two largest economies try to resolve their trade war.
Analysts have turned cautiously optimistic on the oil market, a monthly Reuters poll showed on Friday, lifting their forecast for the average Brent price in 2019 for the first time in five months to $67.12.
Hedge funds and other money managers raised their net long US crude futures and options positions to 243,209 in the week to March 26, the US Commodity Futures Trading Commission said. On the supply front, booming American production has steadied, with the US government reporting on Friday that domestic output in the world's top crude producer edged lower in January to 11.9 million barrels per day.
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