U.S. Markets closed
  • S&P 500

    3,269.96
    -40.15 (-1.21%)
     
  • Dow 30

    26,501.60
    -157.51 (-0.59%)
     
  • Nasdaq

    10,911.59
    -274.00 (-2.45%)
     
  • Russell 2000

    1,538.48
    -23.10 (-1.48%)
     
  • Crude Oil

    35.72
    -0.45 (-1.24%)
     
  • Gold

    1,878.80
    +10.80 (+0.58%)
     
  • Silver

    23.72
    +0.35 (+1.52%)
     
  • EUR/USD

    1.1650
    -0.0029 (-0.2446%)
     
  • 10-Yr Bond

    0.8600
    +0.0250 (+2.99%)
     
  • Vix

    38.02
    +0.43 (+1.14%)
     
  • GBP/USD

    1.2951
    +0.0028 (+0.2163%)
     
  • USD/JPY

    104.6200
    +0.0100 (+0.0096%)
     
  • BTC-USD

    13,740.57
    +125.96 (+0.93%)
     
  • CMC Crypto 200

    265.42
    +1.78 (+0.68%)
     
  • FTSE 100

    5,577.27
    -4.48 (-0.08%)
     
  • Nikkei 225

    22,977.13
    -354.81 (-1.52%)
     

Saudi Arabia May Face Budget Squeeze After 2021, Moody’s Says

Matthew Martin
·2 mins read

(Bloomberg) -- Saudi Arabia may not be able to rely on annual dividends of almost $75 billion from state oil company Saudi Aramco beyond next year unless crude prices increase, according to Moody’s Investors Service.

The government, which owns 98% of Aramco, has depended on the dividend to help plug its budget deficit.

“The government is unlikely to be able to repeat the maneuver beyond 2021,” Moody’s said in a report. This is the case “particularly when taking into account Saudi Aramco’s own capital expenditure needs and its commitment” to buying Saudi Basic Industries Corp.

Aramco agreed earlier this year to buy 70% of the chemicals maker from the government’s Public Investment Fund for $69 billion.

Aramco pledged during its 2019 initial public offering to pay out $75 billion to shareholders during its first five years as a publicly traded company. It has since reaffirmed that commitment. Yet, crude prices have fallen amid the coronavirus pandemic and are 35% lower this year. Aramco, meanwhile is pumping less oil under a deal among global producers to reduce supply.

To honor its dividend pledge, the world’s biggest oil company has said it would decrease spending. It has also laid off hundreds of workers and announced plans to sell non-core assets.

Despite these steps, the company’s gearing ratio has risen, from -5% at the end of March -- meaning Aramco had more cash than debt -- to 20% in June, above its targeted range of 5% to 15%. That’s largely due to the debt it took on to acquire Sabic.

Saudi Arabia last week published an overview of its spending for the next three years that envisages annual cuts to help contain its fiscal deficit. The plans were based on oil prices of around $50 a barrel, according to a Goldman Sachs Group Inc. analysis. Benchmark Brent crude was trading Thursday at around $43 a barrel.

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.