DUBAI, UAE – Oil giant Aramco, backed by the state of Saudi Arabia, announced on Sunday that its profits had nearly halved in 2020 to $ 49 billion, a huge fall that occurred when the coronavirus pandemic rocked global energy markets.
Saudi Arabian Oil Co. published its annual financial results a year after the pandemic sent the price of oil to an all-time low as people stopped moving around the world to curb the spread of the virus. In recent weeks, however, the price has risen as movement restrictions relax, trade increases and more people are vaccinated against COVID-19. Still, analysts warn that a peak in demand may still be far away.
Despite the 44% drop in net income, Aramco said it would fulfill its promise to pay quarterly dividends of $ 18.7 billion ($ 75 billion a year) due to commitments the company made with shareholders in the period prior to its initial public offering. Virtually 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 2020 free cash flows of $ 49 billion contrasts sharply with other oil giants that have reduced payments. In search of a cash infusion to pay the billions of dollars in the face of declining revenues, Aramco has recently issued international bonds.
Public figures, mandatory since the mostly state-owned company listed some of its value on Riyadh’s Tadawul stock exchange in 2019, provide valuable insight into the health of the region’s largest economy. Despite the efforts of Saudi Crown Prince Mohammed bin Salman to diversify the economy outside of 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. Still, Aramco remains one of the most valuable companies in the world.
“In one of the most difficult years in recent history, Aramco demonstrated its unique value proposition through its considerable financial and operational agility,” President and CEO Amin H. Nasser said in a statement. “As a result, our financial position remained strong.”
The company produced the equivalent of 9.2 million barrels of crude oil per day throughout the year, according to its annual results. Capital spending fell in 2020 to $ 27 billion, compared to $ 32.8 billion the previous year. Aramco expects to invest $ 35 billion this year, about $ 5-10 billion less than previous estimates.
In recent months, oil prices have returned to April 2020, when the price of international benchmark Brent crude fell below $ 20 a barrel. For the first time in a year, Brent’s price topped $ 60 a barrel last month and traded more than $ 64 a barrel on Sunday.
Price increases have occurred as Saudi Arabia appears determined to curb production and support crude oil markets, even as demand increases, with nations lifting blockades and speeding up campaigns. of vaccination.
Nasser noted an optimistic note about next year, saying Aramco “sees a recovery in demand in Asia and also positive signs elsewhere.”
“We remain confident that we will emerge on the other side of this pandemic in a position of strength,” he added.
Earlier this month, the kingdom said it would extend the voluntary reduction in production by a million barrels a day at least until April. Most OPEC and allied oil cartels also left their production cuts in place, in contrast to March last year, when a price war between Saudi Arabia and Russia went on. causing the two oil giants to launch an onslaught of crude oil into the market as demand fell. Saudi officials have urged caution, arguing that the global economic recovery may still be undermined by new coronavirus restrictions and fast-spreading virus variants.
Prior to December 2019, when Aramco listed 1.5% of its shares on the stock exchange, the firm was directly owned by Al Saud’s ruling family and did not need to announce results. Initially, Aramco was trading at 32 rials ($ 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 exchanged about 35 rials ($ 9.30) per share.
As oil prices fell and the virus spread around the world, the Saudi economy has shown signs of tension. Last year it fell by more than 4%, according to the government statistics agency. Despite spending cuts and efforts to increase non-oil revenues, even tripling the value-added tax to 15%, the public deficit widened. Last year, Saudi Arabia needed an oil price of more than $ 76 a barrel to balance its budget.