Oil giant Saudi Aramco sees 2020 profits drop to $ 49 billion
DUBAI, United Arab Emirates (AP) – Saudi oil giant Aramco on Sunday announced that its profits almost halved in 2020 to $ 49 billion, a sharp drop that came as the coronavirus pandemic rocked global markets from energy.
Saudi Arabian Oil Co. released its annual financial results a year after the pandemic brought the price of oil down to historically low levels as people stopped moving around the world to stem the spread of the virus. In recent weeks, however, the price has risen slightly as movement restrictions relax, trade increases, and more people are getting vaccinated against COVID-19. Still, analysts warn that a peak in demand could still be a long way off.
Despite the 44% drop in net income, Aramco said it will keep its promise to pay quarterly dividends of $ 18.75 billion – $ 75 billion a year – due to the company’s commitments to shareholders. in the run-up to its IPO. Almost all of the dividend money goes to the Saudi government, which owns over 98% of the company. Aramco’s policy of paying dividends significantly above its $ 49 billion free cash flow in 2020 stands in stark contrast to other oil giants who have cut their payments. In search of an injection of cash to pay off the billions of dollars in the face of declining revenues, Aramco recently issued international bonds.
Public figures, mandatory since the predominantly state-owned company listed part of its value on the Riyadh Tadawul Stock Exchange in 2019, offer valuable insight into the health of the region’s largest economy. Despite Saudi Crown Prince Mohammed bin Salman’s efforts to diversify the economy away from oil, the kingdom remains heavily dependent on oil exports to fuel government spending.
Saudi Aramco’s profit of $ 49 billion in 2020 is down from $ 88.2 billion in 2019 and $ 111.1 billion in 2018. Yet Aramco remains one of the most valued companies in the world.
“During one of the most difficult years in recent history, Aramco has demonstrated its unique value proposition through its considerable financial and operational agility,” said President and CEO Amin H. Nasser in a statement. “As a result, our financial situation has remained strong.”
The company produced the equivalent of 9.2 million barrels per day of crude oil during the year, according to its annual results. Capital spending fell in 2020 to $ 27 billion from $ 32.8 billion the year before. Aramco plans to spend $ 35 billion this year, $ 5 billion to $ 10 billion less than previous estimates.
Aramco facilities come under increasing attack as Iranian-backed Houthi rebels across the southern border target the kingdom’s oil refineries and export terminals. In an interview with Saudi al-Arabiya television on Sunday, Nasser said that Aramco installation of the capital Riyadh hit by drones days before “began to resume service”, adding that the company “has contingency plans to deal with any assault.”
In recent months, oil prices have made a major comeback starting in April 2020, when the price of international benchmark Brent crude fell below $ 20 a barrel. For the first time in a year, the price of Brent surpassed $ 60 a barrel last month and traded above $ 64 a barrel on Sunday.
The price hike came as Saudi Arabia appears determined to curb production and support crude markets even as demand increases, with countries lifting lockdowns and speeding up vaccination campaigns.
Nasser issued an optimistic note for the coming year, saying Aramco “sees a pick-up in demand in Asia and also positive signs elsewhere”.
“We remain convinced that we will come out on the other side of this pandemic in a position of strength,” he added.
Earlier this month, the kingdom announced that it would extend its voluntary production cut of 1 million barrels per day until April. Most of the OPEC and allied oil cartels also left their production cuts in place – unlike March last year when a price war between Saudi Arabia and Russia prompted the two giants tankers to trigger an attack of crude in the market as demand dwindled. Saudi officials have called for caution, arguing that the global economic recovery could still be jeopardized by new restrictions on coronaviruses and rapidly spreading virus variants.
Prior to December 2019, when Aramco floated 1.5% of its shares on the stock market, the company was directly owned by the ruling Al Saud family and did not need to announce its results. Initially, Aramco listed at 32 riyals ($ 8.53) per share, becoming the world’s most valuable listed company, with a market valuation of $ 1.7 trillion. Since then, however, Aramco has lost its stock market crown to Apple as its value declined. On Sunday, it was trading around 35 riyals ($ 9.30) per share.
As oil prices fell and the virus spread across the world, the Saudi economy showed signs of strain. It fell more than 4% last year, according to the government statistics agency. Despite spending cuts and efforts to increase non-oil revenues – notably by tripling the value-added tax to 15% – the public deficit has widened. Last year Saudi Arabia needed an oil price of over $ 76 a barrel to balance its budget.