Saudis no longer disclose oil revenues after Aramco’s stock exchange listing

An employee tracks 2019 trading prices for Saudi Aramco shares.

Photographer: Faisal Al Nasser / Bloomberg

Saudi Arabia has stopped disclosing projected oil revenues following Aramco’s listing, as it could provide clues about the state energy giant’s dividend plans.

The kingdom is counting on payouts of Aramco, the world’s largest oil company, to help close its budget deficit and support an economy ravaged this year by the coronavirus blockage and crude oil price crash. The Dhahran-based company first sold shares in December 2019, although the government still owns about 98% of them.

“The reason we are not disclosing the oil and non-oil breakdown is because of Aramco’s presence as a public company,” Finance Minister Mohammed Al-Jadaan said in a press conference following the announcement of the kingdom’s budget for next year. “The government does business with Aramco as a tax provider. We have income coming from Aramco, taxes coming from Aramco and also dividends as the government is the largest shareholder. “

Read: Saudi Arabia clings to austerity as its 2021 budget is announced

This is the first time in years that the kingdom – which already received dividends from Aramco before going public – has not cut off its expected oil revenues.

As part of their sales pitch to investors, Aramco executives pledged to pay an annual dividend of $ 75 billion – the largest worldwide – for at least five years after the Riyadh IPO. While Aramco has remained on track for the first three quarters of this year, analysts have questioned whether it can sustain such large payments as its finances come under pressure following the drop in oil prices.

Read: Saudi Arabia’s stretched finances ensnare Cash Cow Aramco

Aramco generated $ 33.5 billion in free cash flow in the first nine months of the year, which was more than $ 20 billion less than declared dividends for the period.

Brent crude oil has soared to about $ 50 a barrel since OPEC + – an alliance of major oil exporters led by Saudi Arabia and Russia – shut down production in May. But the global benchmark is still 23% lower this year.

To save money to sustain shareholder payouts, Aramco has reduced spending, more borrowed and laid off hundreds of mainly foreign workers. It is also hired the American investment bank Moelis & Co. to advise her on the sale of interests in some subsidiaries, which could generate billions of dollars.

Oil realism

The Saudi budget for 2021 assumes the average oil price in line with the median of analysts

Source: Bloomberg and Al Rajhi Capital research

The kingdom stated in its budget that it would cut spending by 7.3% next year to 990 billion riyals ($ 264 billion). The turnover is estimated at 849 billion riyals. That would reduce the budget deficit from 12% in 2020 to 4.9% of gross domestic product.

Cairo-based bank EFG Hermes estimates that the government expects an average oil price of $ 45- $ 48 per barrel by 2021.

“We expect government oil revenues to be in the range of 400-500 billion riyals, depending on Aramco dividends,” Al Rajhi Capital of Riyadh said in a report. Non-petroleum product revenues will be around 400 billion riyals, boosted by an increase in value-added tax and private sector growth, he said.

Analysts at Goldman Sachs Group Inc. said in October that, according to their calculations, the kingdom was budgeting for oil prices. about $ 50 a barrel for the next three years.

What Bloomberg Economics says:

“The government has stopped making projections for oil revenues. The 2021 budget captures oil revenues with remittances from the central bank, gains from government investments, administrative costs and confiscations. This makes it more difficult to derive the oil price assumption from the budget. “

– Ziad Daoud, chief emerging market economist

Country	2019	2020	2021
Iran	244	389	320
Iraq	56	60	54
Kuwait	53	61	60
Saudi Arabia	83	76	66
United Arab Emirates	67	69	61

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