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DUBAI, United Arab Emirates (AP) – Saudi Arabia’s state-backed oil giant Aramco on Sunday announced that its profits nearly halved in 2020 to $ 49 billion, a sharp drop as the coronavirus pandemic has shaken global energy markets.
Saudi Arabian Oil Co. released its annual financial results a year after the pandemic dropped the price of oil 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 restrictions on movement have eased, 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 its shareholders. in view of its initial public offering. 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 in excess of its free cash flow of $ 49 billion for 2020 stands in stark contrast to other oil giants that have cut payments. In search of an injection of cash to pay off billions of dollars in the face of declining income, Aramco recently issued international bonds.
Public figures, mandatory since the predominantly state-owned company listed part of its stock on Riyadh’s 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 world’s most valuable companies.
“During one of the most difficult years in recent history, Aramco has demonstrated its unique value proposition through its 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, about $ 5 billion to $ 10 billion less than previous estimates.
In recent months, oil prices have made a significant 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 exceeded $ 60 a barrel last month and was trading above $ 64 a barrel on Sunday.
The price hike came as Saudi Arabia appears determined to cut production and support crude markets even as demand increases, with countries lifting lockdowns and ramping up vaccination campaigns.
Nasser issued an optimistic note for the coming year, saying Aramco “sees a recovery in demand in Asia and also positive signs elsewhere”.
“We remain convinced that we will emerge on the other side of this pandemic in a position of strength,” he added.
Earlier this month, the kingdom announced it would extend its voluntary production cut of 1 million barrels per day at least 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 pushed the two oil giants to trigger an attack of crude in the market as demand dwindled. Saudi officials have called for caution, saying 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 exchange, the company was directly owned by the Al Saud ruling family and did not need to announce the results. Initially, Aramco listed 32 riyals ($ 8.53) per share, making it 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, he traded around 35 riyals ($ 9.30) per share.
As oil prices have fallen and the virus has spread around the world, the Saudi economy has shown 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.
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