DUBAI, United Arab Emirates (AP) – Saudi Arabia’s state-backed oil giant Aramco announced on Sunday that its profits nearly halved to $ 49 billion in 2020, a major drop that came as the coronavirus pandemic hit global energy markets. stirred.
Saudi Arabian Oil Co. published its annual financial results a year after the pandemic pushed oil prices to a historic low when people stopped traveling the world to stop the spread of the virus. In recent weeks, however, the price has risen slightly as movement restrictions decrease, trade increases, and more people are vaccinated against COVID-19. Still, analysts warn that a spike in demand could be a long way off.
Despite the 44% decline in net income, Aramco said it would keep its promise to pay quarterly dividends of $ 18.75 billion – $ 75 billion per year – as a result of commitments the company made to shareholders in the run-up to its IPO. Almost all dividend money goes to the Saudi government, which owns more than 98% of the company. Aramco’s policy of paying dividends significantly in excess of its $ 49 billion free cash flow in 2020 is in stark contrast to other oil giants who have cut payouts. Seeking a cash injection to pay the billions of dollars in the face of declining earnings, Aramco recently issued international bonds
The public figures, compulsory since the largely state-owned company listed some of its value on the Tadawul stock exchange in Riyadh in 2019, provide 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 boost 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 world’s most valuable companies.
“In one of the most challenging years in recent history, Aramco demonstrated its unique value proposition through its significant financial and operational flexibility,” President and CEO Amin H. Nasser said in a statement. “As a result, our financial position remained robust.”
The company produced the equivalent of 9.2 million barrels of crude oil per day during the year, according to the annual results. Capital expenditures fell to $ 27 billion in 2020 from $ 32.8 billion the year before. Aramco expects to spend $ 35 billion this year, about $ 5-10 billion lower than previous estimates.
In recent months, oil prices have made a major comeback from April 2020, when the price of the international benchmark Brent crude oil fell below $ 20 a barrel. For the first time in a year, Brent’s price surpassed $ 60 a barrel last month and traded more than $ 64 a barrel on Sunday.
The price hike has come because Saudi Arabia appears determined to curb production and support raw markets even as demand rises, with countries lifting lockdowns and speeding up vaccination campaigns.
Nasser made an optimistic comment about the coming year, saying that Aramco “sees an improving demand in Asia and positive signs elsewhere.”
“We remain confident that we will appear on the other side of this pandemic in a strong position,” he added.
Earlier this month, the kingdom said it would extend its voluntary production cuts of at least 1 million barrels per day through April. Most OPEC oil cartels and related countries also continued their production cuts – in stark contrast to March last year, when a price war between Saudi Arabia and Russia prompted the two oil giants to unleash a crude oil attack on the market. when demand fell. Saudi officials have urged 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 floated 1.5% of its shares, the company was directly owned by the ruling Al Saud family and was not required to disclose any results. Initially, Aramco was trading at 32 riyals ($ 8.53) per share, becoming the world’s most valuable publicly traded company, with a market value of $ 1.7 trillion. However, Aramco has since lost its stock market crown to Apple when its value fell. On Sunday, it traded about 35 riyals ($ 9.30) a share.
As oil prices fell and the virus spread around the world, the Saudi economy showed signs of tension. According to the government statistics office, it shrank by more than 4% last year. Despite budget cuts and attempts to boost non-oil revenues – including by tripling the value added tax to 15% – the government deficit widened. Last year, Saudi Arabia needed an oil price of more than $ 76 a barrel to balance its budget.