When Amin Nasser met investors at the palatial St. Regis hotel in midtown Manhattan last week, the chief executive officer of the world’s biggest oil company had one clear message: we’re in a league of our own.
After a bruising two years of being buffeted by delays to an initial public offering, investor skepticism over the valuation and profound change within Saudi Arabia, the CEO was here to set Wall Street straight: “Saudi Aramco is no ordinary oil company,” the 60-year-old petroleum engineer told his audience, according to a person who was present.
A week later, it’s clear the bankers believed him. Aramco sold $12 billion of bonds yesterday in what was one of the most oversubscribed offerings in history. In an incredibly rare turn, demand was so high that the company was able to borrow at a lower yield than its sovereign parent. More importantly, the sale demonstrated Saudi Arabia’s return to the global capitalist fold after being ostracized over the assassination of Jamal Khashoggi last year.
For Nasser, the bond sale is the apotheosis of his career, all the more remarkable because the revelations it brought would have been unthinkable just a few years ago. After decades of secrecy, Aramco has in quick succession revealed its balance sheet, the status of oil fields and the financial relationship with the government, its only shareholder.
“Aramco executives have a strong reputation, they are straight shooters,” said Jim Krane, an energy research fellow at the Baker Institute at Rice University in Houston. “If they say they are going to do something, they do it.”
Aramco, which pumps about one in every 10 oil barrels globally, isn’t just the world’s most profitable company, easily outpacing American titans such as Apple Inc. and JPMorgan Chase & Co., it’s also the cash cow sustaining the entire kingdom.
Even with that track record, the task of selling debt was daunting. For the first time in four decades, the company would be answerable to someone other than the government. While Aramco was already regarded as a well-run company, comparable to any international competitor, the search for bond investors required a whole new public vocabulary as officials for the first time answered questions on balance sheets and cash flows.
To accomplish the transition, Nasser surrounded himself with a small team of executives, all of whom went from anonymity to Wall Street A-list within a week.
Among them was Khalid Dabbagh, who became chief financial officer only a year ago, and Motassim al-Ma’Ashouq, the treasurer who led the preparations for Aramco’s now delayed IPO. Both handled most of the global roadshow, according to people familiar with the presentations, who asked not to be identified because the meetings were private. Other senior managers such as Yasser Mufti, the head of strategy, also pitched in.
Collectively, they delivered what Crown Prince Mohammed bin Salman presumably wanted: a blockbuster deal, attracting almost $100 billion in orders, that was so sought after it actually reduced overall borrowing costs for the kingdom.
The company’s profile combined with investors’ hunt for yield in emerging markets made the bond offering irresistible for many, said Jason Bordoff, the director of the Center on Global Energy Policy at Columbia University in New York. In an era of diminishing or negative yields, Aramco’s longest-dated bonds received the strongest demand.
Those seeking to use the sale as a gauge of Saudi Arabia’s rehabilitation into the global community should take that into account, said Karen Young, a resident scholar at the American Enterprise Institute in Washington and a specialist in the political economy of the Middle East. “The success of the Aramco bond debut says more about global investor appetite,” she said.
Aramco has also deployed an army of investor relations specialists over the past two years, initially focused on the planned IPO and then the bond sale. Fergus MacLeod, formerly head of investors relations at BP Plc, led the effort with Louise Hough, a 25-year veteran at Credit Suisse Group AG, and Ruban Chandran, another BP alumni.
The success of the bond roadshow was in contrast to their efforts on the IPO, where most investors balked at the suggested valuation of $2 trillion. While equity investors were anxious about oil prices and dividends, the bond traders cared more about yields and a pristine balance sheet. Aramco was able to deliver on both.
Talks with bond investors accelerated earlier this year as Nasser embarked on several days of back-to-back meetings on the sidelines of the World Economic Forum in Davos, Switzerland. By then, the focus was on the debt sale rather than the IPO. Both would be able to generate the funds needed for the crown prince’s agenda of economic and social reform.
For Nasser, perhaps more at ease with Saudi geology than Wall Street finances, the deal is the culmination of a 37-year career that began in the vast oil fields of the desert kingdom. He wound up as the company’s chief petroleum engineer before his elevation to the CEO role in 2015. His predecessor, Khalid Al-Falih, is the current energy minister.
As Aramco priced the bonds in New York on Tuesday evening, Nasser was back in the kingdom for a dinner with the Society of Petroleum Engineers. Abdullah Jum’ah, who ran the company from 1995 to 2009, welcomed him back home as “the $100 billion man”.