Saudi Aramco’s 2020 Profits Drop by 44% to $49bn

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By Emmanuel Addeh with agency report

Saudi Arabia’s state-backed oil giant Aramco announced Sunday that its profits nearly halved in 2020 to $49 billion, a big drop that came as the coronavirus pandemic roiled global energy markets.

The Saudi Arabian oil company released its annual financial results a year after the pandemic sent the price of oil crashing to all-time low as people stopped moving around the world to stem the spread of the virus.

In recent weeks, however, the price has edged up as movement restrictions ease, commerce increases and more people get vaccinated against COVID-19. Still, analysts caution that a peak in demand may still be far off.

The Associated Press reported that despite the 44 per cent drop in net income, Aramco said it would stick to its promise of paying quarterly dividends of $18.75 billion — $75 billion a year — due to commitments the company made to shareholders in the run-up to its initial public offering.

Nearly all of the dividend money goes to the Saudi government, which owns more than 98 per cent of the company.
Aramco’s policy to pay dividends significantly higher than its 2020 free cash flow of $49 billion stands in sharp contrast to other oil giants that have cut payouts.

Seeking a cash infusion to pay the billions of dollars in the face of dwindling revenue, Aramco recently issued bonds.

The public figures, obligatory ever since the mostly state-owned company listed a sliver of its worth on Riyadh’s Tadawul stock exchange in 2019, offer 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 fuel government spending.

Although Saudi Aramco’s profit of $49 billion in 2020 is down from $88.2 billion in 2019 and $111.1 billion in 2018, still the oil company 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 considerable financial and operational agility. As a result, our financial position remained robust,” President and CEO Amin Nasser said in a statement.

The company produced the equivalent of 9.2 million barrels per day of crude oil over the course of the year, its annual results said.

Capital expenditure was down in 2020 to $27 billion compared to $32.8 billion the year before. Aramco expects to spend $35 billion this year, some $5-10 billion lower than previous estimates.

In recent months, oil prices have made a major comeback from April 2020, when the price of international benchmark Brent crude dipped below $20 a barrel. For the first time in a year, the price of Brent surpassed $60 a barrel last month and traded over $64 a barrel Sunday.
Before December of 2019, when Aramco floated 1.5 per cent of its shares on the stock exchange, the firm was owned directly by the Al Saud ruling family and didn’t need to announce results.

Initially, Aramco listed at 32 riyals ($8.53) a share, becoming the world’s most valuable listed company, with a market valuation of $1.7 trillion. Since then, however, Aramco lost its stock exchange crown to Apple as its value declined. On Sunday it traded around 35 riyals ($9.30) a share.