UAE's top oil producer prepares to sell bonds for first time

[DUBAI] The largest oil producer in the United Arab Emirates (UAE) is preparing to sell its first bonds as the energy-rich country pushes plans to diversify its economy and attract international investors.

Abu Dhabi National Oil is creating a new entity to become its primary vehicle for selling debt, the company said in a statement.

Adnoc Murban, as the issuer will be known, was assigned the 3rd-highest credit rating by Standard & Poor's and Moody's Investors Service.

Adnoc will grant the new entity long-term supply rights to its main crude oil grade, known as Murban, according to S&P and Moody's.

Adnoc Murban will then sell the roughly 1 million barrels a day of crude back to the parent company or its trading unit, generating cash to support debt payments, the rating companies said.

Income from the sales will give Adnoc Murban annual cash flow of more than US$21 billion based on an oil price between US$50 and US$70 a barrel, Moody's said.

Oil has gained more than 10 per cent this year and last week traded near US$90 a barrel, the highest levels since 2014 as demand recovers after dropping during coronavirus-linked lockdowns.

The UAE, the 3rd-largest producer in the Organization of Petroleum Exporting Countries, is leaning on its oil earnings to help build industries like manufacturing and technology.

That's meant to create jobs and develop sustainable sources of income to support the country when energy demand switches away from hydrocarbons.

Adnoc, whose borrowings have so far been limited to bank loans, has been leading the push to attract foreign investors by selling stakes in some of its businesses to partners and listing units on the stock exchange.

Tapping the bond market will give the company another tool for raising cash and potentially more flexibility to extend its debt maturities.

The Abu Dhabi government in 2020 sold a 50-year bond, the longest maturity of any Gulf government debt.

Funding Opportunities Adnoc said the new entity "intends to closely monitor market conditions and explore potential funding opportunities."

Adnoc Murban will conduct introductory meetings with fixed-income investors starting Tuesday (Jan 25) ahead of an expected debt sale this year, according to a mandate. JPMorgan Chase and Morgan Stanley are coordinating the meetings.

Murban crude, pumped from onshore deposits in Abu Dhabi, makes up roughly half of Adnoc's overall production capacity of 4 million barrels a day.

The rest comes from fields in the Persian Gulf. Adnoc has rights to 60 per cent of Murban output with international partners including BP and TotalEnergies holding the rest.

Adnoc began trading Murban on an Abu Dhabi-based exchange last year and hopes that other reqional producers will adopt it as a pricing benchmark for their own barrels.

Adnoc Murban received a AA rating with a stable outlook from S&P and an Aa2 rating by Moody's. Fitch Ratings assigned the entity an AA ranking.

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