Oil giant Saudi Aramco sees 2020 profits drop to $ 49 billion

Oil giant Aramco, backed by the state of Saudi Arabia, announced on Sunday that its profits had almost halved in 2020 to $ 49 billion, a huge drop that came when the coronavirus pandemic clouded global energy markets.

Saudi Arabian Oil Co. released its annual financial results a year after the pandemic caused the price of oil to fall to the maximum, as people stopped moving around the world to contain the spread of the virus. In recent weeks, however, the price has risen as restrictions on movement have eased, trade has increased and more people have been vaccinated against COVID-19. Still, analysts warn that a peak in demand may still be a long way off.

Despite the 44% drop in net income, Aramco said it would keep its promise to pay quarterly dividends of $ 18.75 billion – $ 75 billion a year – due to commitments the company made to shareholders in preparation for its initial public offering. Almost all of the dividend money goes to the Saudi government, which owns more than 98% of the company. Aramco’s policy of paying dividends significantly higher than its $ 49 billion free cash flow in 2020 stands in sharp contrast to other oil giants that have cut payments. Seeking an injection of cash to pay the billions of dollars in the face of ever-diminishing revenue, Aramco recently issued international bonds.

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Public figures, mandatory since the majority state-owned company listed a portion of its value on the Tadawul de Riyadh 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, moving 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 less than $ 88.2 billion in 2019 and $ 111.1 billion in 2018. Still, Aramco remains one of the most valuable companies in the world.

“In one of the most challenging years in recent history, Aramco 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 position has remained robust.”

The company produced the equivalent of 9.2 million barrels per day of crude oil throughout the year, according to its annual results. Capital expenditures fell in 2020 to $ 27 billion, compared to $ 32.8 billion the previous year. Aramco expects to spend $ 35 billion this year, about $ 5-10 billion below previous estimates.

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Aramco’s facilities are under increasing attack as Iran-backed Houthi rebels from Yemen cross the southern border with the aim of the kingdom’s oil refineries and export terminals. In an interview with Saudi TV al-Arabiya on Sunday, Nasser said that an Aramco facility in the capital of Riyadh hit by drones a few days earlier “started to return to service”, adding that the company “has contingency plans to deal with any assault. . “

In the past few months, oil prices have had a big return since April 2020, when the price of international benchmark Brent oil fell below $ 20 a barrel. For the first time in a year, Brent’s price exceeded $ 60 a barrel last month and traded more than $ 64 a barrel on Sunday.

The price increase came as Saudi Arabia appears determined to curb production and support oil markets, even as demand grows, with nations lifting blockades and speeding up vaccination campaigns.

Nasser gave an optimistic note about next year, saying that Aramco is “seeing a recovery in demand in Asia and also positive signs elsewhere”.

“We remain confident that we will emerge from the other side of this pandemic in a position of strength,” he added.

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Earlier this month, the kingdom said it would extend its voluntary production cut of 1 million barrels a day until April. Most OPEC oil cartels and allied countries also left their production cuts in place – in stark contrast to March last year, when a price war between Saudi Arabia and Russia led the two oil giants to unleash a violent attack of oil on the market when demand fell. Saudi officials urged caution, arguing that the global economic recovery may still be hampered by new restrictions on coronaviruses and rapidly spreading virus variants.

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Before December 2019, when Aramco launched 1.5% of its shares on the stock exchange, the company was directly owned by the ruling Al Saud family and did not need to announce results. Initially, Aramco listed 32 rials ($ 8.53) per share, making it the most valuable listed company in the world, with a market valuation of $ 1.7 trillion. Since then, however, Aramco has lost its crown on the stock exchange to Apple as its value has declined. On Sunday, he traded about 35 rials ($ 9.30) per share.

As oil prices fell and the virus spread around the world, the Saudi economy showed signs of tension. It shrank by more than 4% last year, according to the government’s statistics agency. Despite spending cuts and efforts to increase non-oil revenues – including tripling value-added tax to 15% – the government’s deficit has widened. Last year, Saudi Arabia needed an oil price of more than $ 76 a barrel to balance its budget.