DUBAI- Saudi Aramco will use cash and debt to pay its dividend of $18.75 billion for the first quarter of this year, the company's chief executive said on Thursday, after the top oil firm sealed a major acquisition deal.

"It will be a combination of both," Amin Nasser told reporters on a conference call.

"We would like to use our free cash definitely most of time, but other debt instruments from banks or bonds are also available for us as we have a strong balance sheet," he said.

Nasser was speaking a day after Aramco completed its purchase of a 70% stake in petrochemicals company SABIC from Saudi Arabia's sovereign wealth fund, the Public Investment Fund (PIF), for $69.1 billion and extended the payment period by three years to 2028.

"We reached an agreement with the PIF that is a win-win," Nasser said, adding that the payment structure would "allow us to continue to execute our projects and deliver on our commitments."

The ratio between Aramco's debt and its market value, or gearing, would rise after the SABIC purchase, Nasser said. In the first quarter of this year Aramco's gearing dropped to minus 5%, compared to a range of 11% to 36% for Western rivals.

He said Aramco's gearing target was between 5% and 15%.

Aramco reported $16.6 billion profit in the first quarter, more than double the combined profits of the top five Western oil and gas companies.

Aramco amassed $15 billion in cash in the first quarter but that is not enough to pay a $18.8 billion dividend for the period when benchmark Brent crude prices averaged $50 a barrel, compared to $66 at the end of 2019.

Nasser said he saw signs of recovery in oil demand in the second half of 2020 as countries eases coronavirus lockdowns.

(Additional reporting by Nafisa Eltahir; Editing by Mark Potter and Edmund Blair) ((rania.elgamal@thomsonreuters.com; +971 562 160 434; Reuters Messaging: rania.elgamal.reuters.com@reuters.net ; Twitter: @RaniaElGamal10))