DUBAI, UAE – Saudi Arabia’s oil giant Aramco said on Sunday that its profits had halved to nearly $ 49 billion in 2020, a significant drop that emerged as the coronavirus pandemic past global energy markets.
Saudi Arabian Oil Co. published its annual financial results a year after the pandemic sent the price of oil collapse to historic lows, while people stopped traveling around the world to stop the spread of the virus. However, in recent weeks, the price has risen as movement restrictions ease, trade grows and more people are vaccinated against COVID-19. However, analysts warn that a peak in demand could be far away.
Despite a 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 the company’s commitments to shareholders in the run-up to its initial public offering. Almost all of the dividend money goes to the Saudi government, which owns more than 98 percent of the company. Aramco’s policy of paying significantly higher dividends than the $ 49 billion free cash flow in 2020 contrasts sharply with other oil giants that have reduced payments. Looking for a cash infusion to pay billions of dollars in the face of declining revenues, Aramco recently issued international bonds.
The public figures, mandatory since most of the state-owned company listed part of its value on the Riyadh Tadawul stock exchange in 2019, offer a 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 away from oil, the kingdom remains heavily dependent on oil exports to fuel government spending.
Saudi Aramco’s $ 49 billion profit in 2020 fell from $ 88.2 billion in 2019 and $ 111.1 billion in 2018. However, Aramco remains one of the most valuable companies in the world.
“In one of the most challenging years in recent history, Aramco has 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 has remained robust.”
The company produced the equivalent of 9.2 million barrels per day of crude oil during the year, according to its annual results. Capital expenditures fell to $ 27 billion in 2020 from $ 32.8 billion the previous year. Aramco expects to spend $ 35 billion this year, $ 5-10 billion less than previous estimates.
In recent months, oil prices have fallen sharply since April 2020, when the price of international benchmark Brent crude oil fell below $ 20 a barrel. For the first time in a year, Brent’s price topped $ 60 a barrel last month and traded above $ 64 a barrel on Sunday.
Rising prices have come, as Saudi Arabia appears determined to limit production and support crude oil markets even as demand rises, with nations lifting bottlenecks and speeding up vaccination campaigns.
Nasser gave an optimistic note about next year, saying Aramco “sees an increase 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 1 million barrels a day at least until April. Most of OPEC’s oil cartels and allied countries have also left their production cuts in place – in stark contrast to March last year, when a price war between Saudi Arabia and Russia led to the two giants. oil companies to launch a crude attack on the market as demand fell. Saudi officials have called for caution, arguing that the global economic recovery could still be undermined by new coronavirus restrictions and rapidly spreading virus variants.
Prior to December 2019, when Aramco paid 1.5% of its shares on the stock exchange, the company was owned directly by the ruling family Al Saud and did not have to announce results. Initially, Aramco is listed at 32 rials ($ 8.53) per share, becoming the most valuable listed company in the world, with a market valuation of $ 1.7 trillion. Since then, however, Aramco has lost its stock market crown to Apple, as its value has declined. On Sunday he traded around 35 rials ($ 9.30) per share.
As oil prices fell and the virus circulated around the world, the Saudi economy showed signs of tension. It fell by more than 4% last year, according to the government’s statistics agency. Despite reduced spending and efforts to increase non-oil revenues – including by tripling the value added tax to 15% – the government deficit has widened. Last year, Saudi Arabia needed an oil price of more than $ 76 a barrel to balance its budget.