Energy giant Saudi Arabian Oil Co (Aramco) on Sunday said that its second-quarter profits plunged a massive 73 percent due to sharply lower oil prices as the COVID-19 pandemic undercuts global demand.
The behemoth posted a net profit of US$6.6 billion for the three months to June 30 compared with US$24.7 billion for the same period of last year.
The results are in line with analysts’ expectations, but stand in contrast to the losses reported by its rival energy giants, which are reeling from a drop in oil demand since the start of the pandemic.
“Strong headwinds from reduced demand and lower oil prices are reflected in our second-quarter results,” Aramco chief executive Amin Nasser said in a statement.
‘SOLID EARNINGS’
“Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivaled financial and operational strength,” he added.
Aramco’s net profit for the first half of the year also slumped by 50.5 percent to US$23.2 billion, compared with US$46.9 billion in the same period last year.
The results underscore a downbeat oil market as pandemic-driven economic shutdowns crush the global demand for crude.
Five other leading oil firms — BP PLC, Chevron Corp, ExxonMobil Corp, Royal Dutch Shell PLC and Total SA — have reported combined losses of US$53 billion for the second quarter.
By contrast, Aramco’s results reflected its “financial resilience,” Nasser said, as the company presses ahead with a plan to pay US$75 billion in dividends this year.
Nasser also voiced optimism over what he called a “partial recovery in the energy market” amid an easing of virus restrictions in some countries.
However, amid low crude prices, Aramco is looking at cutting its next year’s budget by 8 to 10 percent from this year’s already reduced levels, the Energy Intelligence Group reported last month.
Aramco has said it expects capital expenditure to be at the “lower end of the US$25 billion to US$30 billion range” this year.
That is significantly lower than its expenditure of US$32.8 billion last year, Energy Intelligence said.
JOB LOSSES
The company has also slashed hundreds of jobs as it seeks to reduce costs, Bloomberg News reported in June.
Saudi Arabia, the world’s biggest crude oil exporter, has been hit hard by the double whammy of low prices and sharp cuts in production.
Aramco’s profits were also affected by the losses posted by the Saudi Basic Industries Co, the petrochemicals giant it acquired for US$69 billion in a deal completed this year.
The energy giant is bracing for a possible further wave of coronavirus infections that could affect a tentative global economic recovery and erode the demand for crude worldwide, analysts have said.
Aramco was listed on the Saudi bourse in December last year following the world’s biggest initial public offering, generating US$29.4 billion for 1.7 percent of its shares.
Nasser said Aramco would distribute US$18.75 billion in dividends for the second quarter to keep its listing promise of distributing at least US$75 billion in annual dividends for five years.
‘COMMITTED’
“We are committed to delivering sustainable dividends through market cycles, as we have demonstrated this quarter,” Nasser said in a media call, Bloomberg News reported.
“Our intention is to pay US$75 billion, subject to board approval, of course, and market conditions,” he said.
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