(Adds dropped "billions" in paragraph 3)
* Aramco Q1 cash fell short of $18.8 bln dividend
* Debt to rise following SABIC acquisition
* GRAPHIC: Big Oil's total debt https://tmsnrt.rs/2WpjQcn
By Ron Bousso
LONDON, May 12 (Reuters) - Saudi Aramco's debt is
expected breach target levels as an oil price collapse triggered
by the coronavirus forces it to borrow to meet the world's
largest dividend pledge and buy a major stake in petrochemicals
maker SABIC, analysts said.
Compared with western oil companies, Saudi Arabia's national
oil company appears in robust financial health.
On Tuesday, it reported $16.6 billion in profits in the
first quarter, more than double the combined profits of the top
five western oil and gas companies, as the impact of the
coronavirus-related travel restrictions began to be
felt.
Aramco shares were up 1.2% at 1442 GMT.
But, although Aramco amassed $15 billion in cash, that was
not enough to pay its $18.8 billion dividend for the quarter,
when global benchmark Brent crude oil prices averaged
$50 a barrel.
"Aramco would be borrowing to pay its dividend, which cannot
be sustainable in the long term," Bernstein analysts said in a
note.
The ratio between Aramco's debt and its market value, or
gearing, dropped to minus 5% in the quarter. That compares with
a gearing range of 11% to 36% for its western rivals.
Saudi Arabia last year listed 1.7% of its national oil
company, the world's top oil exporter, in the domestic bourse
making it the world's most valuable company. It lured investors
with a promise to deliver $75 billion in dividends over the next
five years.
Also last year, it agreed to acquire a controlling stake in
Saudi petrochemicals maker SABIC, a deal it is seeking
to restructure following the collapse in oil prices, sources
told Reuters on Sunday.
Aramco is required under the current terms to pay $25
billion this year to the kingdom's sovereign wealth fund,
according to the payment terms.
Together, the dividend and the SABIC deal were set to push
Aramco's gearing above the top of the self-imposed range of 5%
to 15%, Credit Suisse analyst Thomas Adolff said in a note.
"If the government wants Aramco to pay $75 billion in
dividends, it will do so by re-leveraging its balance sheet,"
Adolff said.
In March, Aramco's Chief Financial Officer Khalid al-Dabbagh
said the company had "massive capacity" to borrow, but did not
favour taking on additional debt.
For the kingdom as a whole more debt is worrying as the drop
in oil prices means a sharp drop in revenue for Saudi Arabia.
A current easing of the global movement restrictions to
contain the coronavirus is unlikely to provide rapid relief. The
oil market remains oversupplied, pressure is high to reduce
fossil fuel use to protect the environment and analysts have
revised down price forecasts.
With oil prices around $30 a barrel, Aramco's ability to
generate cash is likely to deteriorate in the second quarter.
"Bottom line, times are tough globally, including for Saudi
Arabia," the Credit Suisse note concluded.
(Additional reporting by Rania El Gamal in Dubai; editing by
Barbara Lewis)
