Energy giant Saudi Arabian Oil Co (Aramco) yesterday posted a 44.4 percent slump in net profit last year due to lower crude prices, as the COVID-19 pandemic weighed heavily on global demand.
Aramco, Saudi Arabia’s cash cow, has revealed consecutive falls in profits since it began disclosing earnings in 2019, piling pressure on government finances, as Riyadh pursues multibillion dollar projects to diversify the oil-reliant economy.
“Aramco achieved a net income of US$49 billion in 2020,” the company said in a statement — down from US$88.2 billion in 2019.
Saudi Arabia, the world’s biggest crude exporter, was hammered last year by the double whammy of low prices and sharp cuts in production.
“The company displayed strong financial resilience in one of the most challenging periods for the industry,” the Aramco statement said. “Revenues were impacted by lower crude oil prices and volumes sold, and weakened refining and chemicals margins.”
Crude prices have risen in the past few weeks to more than US$60 per barrel.
Analysts say that the Saudi Arabian giant is bracing for a possible further wave of COVID-19 infections that could undermine a tentative global economic recovery.
Even as its earnings plunged, Aramco said it stuck to its commitment of paying shareholders a US$75 billion dividend last year — an amount that exceeds the declared profit.
Dividend payments from Aramco help the Saudi Arabian government, the company’s biggest shareholder, manage its ballooning budget deficit.
Belt-tightening had kept the firm’s financial position “robust,” enabling it to pay out dividends of US$75 billion for last year, Aramco chief executive Amin Nasser said.
“As the enormous impact of COVID-19 was felt throughout the global economy, we intensified our strong emphasis on capital and operational efficiencies,” Nasser said.
Aramco “expects capital expenditure for 2021 to be around [US]$35 billion, significantly lower than the previous guidance of [US]$40 billion to [US]$45 billion,” the statement said.
Aramco has also slashed hundreds of jobs as it seeks to reduce costs, Bloomberg News reported in June last year.
A drop in oil income is expected to hinder Crown Prince Mohammad bin Salman’s ambitious “Vision 2030” reform program to overhaul the kingdom’s energy-reliant economy.
Aramco was listed on the Saudi Arabian bourse in December 2019, following the world’s biggest initial public offering, generating US$29.4 billion for 1.7 percent of its shares.
In January, the prince said that the kingdom would sell more Aramco shares in the coming years.
The kingdom’s de facto ruler said future share offerings would be a key way to boost the Public Investment Fund, the kingdom’s sovereign wealth fund, which is the main engine of its diversification efforts.
Analysts say further share offerings could struggle to generate investor interest amid a downbeat energy market, as the COVID-19 pandemic saps global demand.
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