DUBAI, United Arab Emirates (AP) – Arab Arab state-backed oil giant Aramco announced on Sunday that its profits had almost halved to $ 49 billion in 2020, a sharp drop that came when the coronavirus pandemic hit global energy markets.
Saudi Arabian Oil Co. announced its annual financial results a year after the pandemic caused the oil price to plummet at all times when people stopped moving around the world to halt the spread of the virus. Over the past week, however, the price has risen as movement restrictions ease, trade increases and more people are vaccinated against COVID-19. However, analysts warn that a peak in demand may still be far away.
Despite the 44% drop in net income, Aramco said it would keep its promise to pay quarterly dividends of $ 18.75 billion – $ 75 billion a year – due to the company’s commitments to shareholders in the run-up to to its initial public offering. Almost all of the dividend money goes to the Saudi government, which owns more than 98% of the company. Aramco’s policy of paying dividends significantly higher than its $ 49 billion free cash flow in 2020 stands in stark contrast to other oil giants that have reduced payouts. In search of a cash infusion to pay billions of dollars in the face of declining revenues, Aramco recently issued international bonds.
The public figures, mandatory since the mostly state-owned enterprise listed some of its value on Riad’s Tadawul Stock Exchange in 2019, provide valuable insight into the health of the region’s largest economy. Despite Saudi Crown Prince Mohammed bin Salman’s efforts to diversify the oil economy, the kingdom remains heavily dependent on oil exports to boost government spending.
Saudi Arabia’s $ 49 billion profit in 2020 lower than $ 88.2 billion in 2019 and $ 111.1 billion in 2018. Yet Aramco remains one of the world’s most valuable companies.
“In one of the most challenging years in recent history, Aramco has demonstrated its unique value proposition through its significant financial and operational agility,” said Amin H. Nasser, President and CEO, in a statement. “As a result, our financial position has remained robust.”
The annual results show that the company is equivalent to 9.2 million barrels of crude oil per day during the year. Capital expenditure fell to $ 27 billion in 2020, compared to $ 32.8 billion the previous year. Aramco expects to spend $ 35 billion this year, about $ 5-10 billion lower than previous estimates.
In recent months, the oil price has made a big comeback from April 2020, when the price of the international benchmark of Brent crude oil fell below $ 20 per barrel. For the first time in a year, Brent’s price exceeded $ 60 a barrel last month and traded above $ 64 a barrel on Sunday.
The price increase came because Saudi Arabia is determined to curb production and support the crude markets, even though demand is rising, with countries closing in and accelerating vaccination campaigns.
Nasser made an optimistic remark about the year ahead, saying Aramco “sees an increase in demand in Asia and positive signs elsewhere.” ‘
“We remain confident that we will be in a strong position on the other side of this pandemic,” he added.
Earlier this month, the kingdom said it would extend its voluntary production cut of 1 million barrels per day at least until April. Most OPEC oil cartels and allied countries have also made their production cuts – in stark contrast to March last year, when a price war between Saudi Arabia and Russia prompted the two oil giants to launch an onslaught of crude oil on the market. unleashed as demand fell. Saudi officials have called for caution, arguing that the global economic recovery could still be undermined by new coronavirus restrictions and rapidly spreading virus variants.
Prior to December 2019, when Aramco floated 1.5% of its shares on the stock exchange, the firm was directly owned by the Al Saud family and did not need to disclose the results. Initially, Aramco listed 32 shares ($ 8.53) per share and became the world’s most valuable listed company, with a market value of $ 1.7 billion. Since then, however, Aramco has lost its stock market crown to Apple when its value declined. On Sunday, it traded around 35 riyals ($ 9.30) per share.
As oil prices fell and the virus rumbled around the world, the Saudi economy showed signs of tension. According to the government’s statistics agency, it shrank by more than 4% last year. Despite spending on spending and efforts to increase non-oil revenues – including by tripling the value-added tax to 15% – the government deficit has widened. Last year, Saudi Arabia needed an oil price of more than $ 76 a barrel to balance its budget.