Oil price is ‘fair and reasonable’

Updated 30 May 2013
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Oil price is ‘fair and reasonable’

VIENNA: OPEC, enjoying oil at just over $ 100 a barrel, looks set to keep its output policy on a steady course for 2013.
Saudi Arabia, its top oil producer, has already set the stage for a swift and easy deal when oil ministers meet tomorrow and are expected to retain a 30-million barrel-a-day output target.
"Let me tell you this, this is the best environment for the market. Supplies are plentiful, demand is great, balanced -inventories are balanced," Minister of Petroleum and Mineral Resources Ali Al-Naimi said yesterday.
And while the price of oil by historical standards is expensive, it is well below the $ 125 that rang alarms in major consumer countries last year.
"The current price is fair and reasonable," UAE Oil Minister Suhail bin Mohammed Al-Mazroui told Reuters yesterday.
"It's been sustained for some time without impacting the economics of the producers and the countries that are buying the crude. It also encourages investment in future supply," said Al-Mazroui, attending his first meeting of OPEC.

Triple digit oil has also encouraged development of US shale oil, some of which is among the most costly in the world to produce and competes with OPEC's crude.
But Saudi Arabia - holder of most spare capacity in the Organization of the Petroleum Exporting Countries - shows no sign of opening the taps to bring down prices and curtail that output by making it uneconomic.
OPEC, which dismissed it as of little concern a year ago, does not hold a common position on shale. While Al-Naimi welcomes it, his Nigerian counterpart Diezani Alison-Madueke has said it will have a "major impact."
Nigeria, along with Algeria, has already felt the heat from the US oil boom, losing ground in its most lucrative export market and diverting sales to Asia.
Fast-growing exporter Iraq is also fighting for more Asian market share, undercutting regional rival Saudi Arabia.
The United Arab Emirates is the only other OPEC member with significant growth plans. It has the ability to pump 3 million barrels per day (bpd) and plans to increase capacity to 3.5 million bpd by 2017, said Al-Mazroui.
But the minister brushed off any concern of a looming market share battle in Asia.
Saudi Arabia and the UAE were first to arrive in Vienna, with Iraq, Ecuador and Venezuela expected later. The remaining ministers are due today.
Some within OPEC are concerned about the potential for both slow global growth and a dramatic rise in US shale oil to send prices tumbling.
The International Energy Agency forecast this month U.S. shale oil supply will help meet most of the world's new demand in the next five years, leaving little space for OPEC to lift output without risking lower prices.
"We're heading for a problem in 2014 and we'll probably have to make a supply cut," said a senior OPEC source. "And if OPEC were proactive, we'd start to look seriously at individual production allocations."
But the group that pumps a third of the world's oil is not known for contingency plans.
OPEC delegates now say this meeting will not be electing a new secretary general but will merely approve the criteria for prospective candidates to come forward.
And unable for several years to agree individual output quotas, it may need to allocate them if required to cut back heavily and share out reductions.
Until then, Saudi Arabia has assumed the role of market manager - deftly trimming back or raising supply to keep markets in balance and oil at around $ 100 a barrel.
The shale revolution in the United States, still the world's biggest oil consumer ahead of China by a wide margin, has raised hopes among importers that the relentless rise in fuel prices over the past decade may be at an end.
By the end of last year, the United States had recorded the biggest annual increase - 850,000 bpd - in oil output since it first pumped oil in the early 1860s.
Though not in direct response to shale, Riyadh has cut back from a record high reached in 2012 of 10 million bpd to pump 9.3 million bpd in April.
That put OPEC production at 30.46 million bpd, right in line with its calculations for average demand for the group's crude in the second half of the year.
Iran, Algeria and Venezuela - among those with the highest budget breakeven oil prices in OPEC - may still call for supply cuts.
Yet Venezuela, at least, looks set to keep the status quo. Oil Minister Rafael Ramirez has said he will propose that OPEC keep oil production quotas unchanged.


NMC Health’s $450 million bond to boost Saudi expansion

Updated 23 April 2018
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NMC Health’s $450 million bond to boost Saudi expansion

  • The new capital structure — which will feature a mixture of unsecured bank and bond financing — will aid the company’s continued growth into Saudi Arabia.
  • The company first secured a foothold in the Kingdom in 2016 after acquiring a 70 percent stake in As Salama Hospital in Al-Khobar.

LONDON: The UAE-based private health care operator NMC Health has launched a $450 million senior unsecured guaranteed bond to help pay off an existing $1 billion bridge facility and support its expansion plans into Saudi Arabia.

The earlier bridging loan was part of the $2 billion capital structure refinancing put in place at the start of the year, the company said.

The bond is due in 2025 and is convertible into ordinary shares. JP Morgan is the sole bookrunner on the issuance. Bonds will have a fixed coupon rate of 1.875 percent, paid semi-annually.

The new capital structure — which will feature a mixture of unsecured bank and bond financing — will aid the company’s continued growth into Saudi Arabia, with NMC having been one of the first private health care providers to capitalize on the Saudi government’s health care privatization plans.

The company first secured a foothold in the Kingdom in 2016 after acquiring a 70 percent stake in As Salama Hospital in Al-Khobar.

Since then, NMC won regulatory approval last September for a new long-term care facility, the Chronic Care Specialty Medical Center, in Jeddah. It is though to be the first greenfield medical facility in the Kingdom to be set up by a non-Saudi company.

Earlier this year, NMC said it acquired an 80 percent stake in the Riyadh-based Al-Salam Medical Group.

NMC’s acquisition-led expansion strategy aims to ensure the company retains its recently-won place on London’s FTSE 100 index. It was one of the first Middle Eastern companies to join the index when it qualified last September. It first listed on the London Stock Exchange in 2012.

The company posted strong growth in the last year, reporting $209.3 million in net profit for 2017, an increase of 38.2 percent on the previous year. The company paid out a total of $641 million in acquisitions last year.

“2017 proved to be a year of tremendous achievements for NMC,” said the firm’s chief executive Prasanth Manghat, in a statement in March.

NMC also secured secured its first public ratings of BB+ with a stable outlook from S&P on April 20, while Moody’s gave the firm rating of Ba1 with a stable outlook on April 20, 2018. The bonds are not expected to be rated.

“The company continues to strive to meet self-imposed standards that are higher when compared to what is expected of it by various regulators. This approach supports in turn its resilient business model, loyal customer base, strong brand recognition and market leading position,” according to a statement from Moody’s Investors Service.

Investors are so far reacting favorably to NMC’s strategy, with the company closing at a record high on April 20, according to Bloomberg reports, with a market value of $10.8 billion.

The company is now one of 24 equities in the region to have achieved a market capitalization of more than $10 billion, the report said.

Healthcare is seen as a lucrative sector in the Gulf due to its relatively wealthy population becoming increasingly at risk of problems related to obesity and diseases such as type 2 diabetes.