COVID-19 took a heavy toll on Aramco, but the company still made a profit of $ 49 billion and will pay shareholders dividends of $ 75 billion.
Saudi Arabian oil giant Aramco reported a 44.4 percent drop in last year’s net profit as the coronavirus pandemic curbed global demand.
The effect of COVID-19 took a heavy toll on the company and its peers in 2020, but oil prices have soared this year as economies recover from the downturn and oil producers expanded their production cuts.
“Aramco posted net profit of $ 49 billion in 2020,” the company said in a statement on Sunday, down from $ 88.2 billion in 2019.
It said “revenues were impacted by lower crude oil prices and volumes sold, and weakened margins for refining and chemicals.”
Amin Nasser, CEO of Aramco, described 2020 as “one of the most challenging years in recent history”.
But compared to many of its loss-making international competitors, despite the challenges, the company, which made its stock market debut in 2019, capitalized on its “strong financial resilience” and said shareholders would still receive dividends totaling $ 75 billion.
“We are pleased that there are signs of recovery,” Nasser said in an earnings call. “China is also very close to the pre-pandemic level. So in Asia, especially East Asia, there has been a surge in demand. “
He said demand in Europe and the United States would improve if more vaccines against COVID-19 were used. Global oil demand is expected to reach 99 million barrels per day by the end of this year, he added.
Crude oil prices have risen to over $ 60 a barrel in recent weeks.
‘Huge impact’ of COVID
Analysts say the company’s indebtedness soared last year as it offered shareholders a massive dividend even as revenues plummeted.
Aramco lowered its forecast for 2021 capital expenditures to about $ 35 billion from a range of $ 40 billion to $ 45 billion earlier, according to a disclosure from the kingdom’s Tadawul stock exchange. Capital expenditures in 2020 were $ 27 billion.
Referring to the dividend, Nasser said there was no intention to increase it this year from what was pledged.
“The dividend is in line with expectations, which is what Aramco holders care about most, but a lower capex implies that the company does not expect high oil prices to persist in the long run,” said Hasnain Malik, head of equity research at Tellimer.
Shares of Aramco were marginally down 0.6 percent after the results.
For most of the past year, Aramco shares held up well against global oil companies in emerging and developed markets, but underperformed against peers as oil prices recovered.
Without addressing the company’s debt, Aramco’s Nasser said the belt tightening had kept the company’s financial position “robust”, allowing it to pay dividends.
“As the tremendous impact of COVID-19 was felt in the global economy, we intensified our strong emphasis on capital and operational efficiency,” said Nasser.
Aramco has also cut hundreds of jobs to cut costs, Bloomberg News reported last June.
But there are also concerns about an increase in the number of drone and missile strikes against Aramco’s facilities in the kingdom, claimed by the Yemeni Houthi rebels.
A drone attack started a fire at an oil refinery in Riyadh on Friday, in the second major attack this month on Saudi energy facilities claimed by the Iranian group.