Despite Saudi Aramco having robust cash from operations, the oil giant is expected to raise more debt to fund its expansion plans and projects by 2026. In its latest coverage report, Aljazira Capital expects Aramco to raise SAR40 billion ($10.66 billion) in debt by the financial year 2026.
Capex to peak in FY2025
The report adds that despite forecasts of $40 billion in capex savings over financial years 2023-2028 due to maximum sustainable capacity (MSC) expansion cancellation, Aramco maintained 2024’s capex between SAR180 billion and SAR220 billion. In addition, the company raised its natural gas production target from 50 percent to 60 percent of its 2021 levels by 2030.
Therefore, Aljazira Capital expects Aramco’s capex to remain higher from 2024 to 2026 and peak in 2025 due to several factors including:
- Increase in natural gas production
- Expansion of downstream operations
- New energy projects like blue hydrogen
- Maintenance and expansion of upstream facilities
Gas production to outpace oil
Global oil demand has been resilient, but demand growth is likely to slow down in 2024 due to weak global consumption amid sluggish economic growth and a higher interest rate environment. However, it will likely recover in 2025 as emerging markets’ economies recover, the population grows, air travel rises, and inventories rise from their current five-year low. However, to reduce its dependency on oil, Aramco increased its focus on natural gas due to its great potential and reserves in Saudi Arabia.
Aramco’s total production could rise from 12.9 million barrels per day in 2023 to 14.1 million barrels per day by financial year 2028 (1.9 percent CAGR). The report also expects gas production to outpace oil by growing at 4.8 percent CAGR versus 1.2 percent. The upcoming commencement of operations at Jafurah gas fields by 2025, other gas production expansion projects, and growing domestic demand will likely boost production in the next few years.
In addition, Aramco’s current actions in natural gas and downstream operations could drive total revenue from SAR1.856 trillion in FY23 to SAR2.081 trillion in FY28, while net profit could record 3.1 percent CAGR.
Read: Oil demand forecast to reach over 106 million barrels per day in H2 2024, says Aramco chief
Aramco’s long-term prospects
The report also says that Aramco’s long-term prospects are supported by several factors, including:
- Aggressive downstream investments
- Expansion of gas production
- Competitive positioning in the blue ammonia market
The current impact of supply cuts could have a limited short-term impact on Aramco’s performance. However, the increase in production volumes in the next few years could help the topline reach SAR2.081 trillion by 2028.
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