Home Crude Oil Tough Year for Saudi Aramco

Energy giant Saudi Aramco on Sunday posted a 44.4 percent slump in 2020 net profit due to lower crude prices, as the coronavirus 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.

That has piled pressure on government finances as Riyadh pursues multi-billion dollar projects to diversify the oil-reliant economy.

“Aramco achieved a net income of $49 billion in 2020,” the company said in a statement — down from $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.

Aramco chief executive Amin Nasser described it as “one of the most challenging years in recent history”.

The firm said “revenues were impacted by lower crude oil prices and volumes sold, and weakened refining and chemicals margins.”

But compared to many of its loss-generating international peers, the company, which made its stock market debut in 2019, played up its “strong financial resilience” despite the challenges.

Crude prices have risen in recent weeks to over $60 per barrel.

But in the short term, analysts say the Saudi giant is bracing for a possible further waves of coronavirus infections that could undermine a tentative global economic recovery.

As the global vaccination program gains momentum, however, Aramco said it was seeing a pick-up in crude demand in energy-hungry Asia and other parts of the world.

Analysts say the company’s debt levels surged last year as it offered shareholders a bumper dividend even as its earnings plunged.

Aramco said it stuck to its commitment of paying shareholders dividends worth $75 billion in 2020 — an amount that exceeds the declared profit.

Dividend payments from Aramco help the Saudi government, the company’s biggest shareholder, manage its ballooning budget deficit.

– A brake on reforms –

Without addressing the company’s debt, Aramco’s Nasser said belt-tightening had kept the firm’s financial position “robust”, enabling it to pay out the dividends.

“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.

The statement said Aramco “expects capital expenditure for 2021 to be around $35 billion, significantly lower than the previous guidance of $40-$45 billion”.

Aramco has also slashed hundreds of jobs as it seeks to reduce costs, Bloomberg News reported last June.

A drop in oil income is expected to hinder Crown Prince Mohammed bin Salman’s ambitious “Vision 2030” reform programme to overhaul the kingdom’s energy-reliant economy.

Aramco was listed on the Saudi bourse in December 2019 following the world’s biggest initial public offering, generating $29.4 billion for 1.7 percent of its shares.

In January, Prince Mohammed said 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.

But analysts say further share offerings could struggle to generate investor interest amid a downbeat energy market, as the coronavirus pandemic saps global demand.

There are also concerns over an uptick in drone and missile attacks on Aramco’s facilities in the kingdom, claimed by Yemen’s Huthi rebels.

A drone strike sparked a fire at a Riyadh oil refinery on Friday, in the second major assault this month on Saudi energy installations claimed by the Iran-backed insurgents.

You may also like


Your Trusted Source for Capital Markets & Related News

© 2024 LiveTradingNews.com – For The Traders, By The Traders – All Right Reserved.

The information contained on this website shall not be construed as (i) an offer to purchase or sell, or the solicitation of an offer to purchase or sell, any securities or services, (ii) investment, legal, business or tax advice or an offer to provide such advice, or (iii) a basis for making any investment decision. An offering may only be made upon a qualified investor’s receipt not via this website of formal materials from the Knightsbridge an offering memorandum and subscription documentation (“offering materials”). In the case of any inconsistency between the information on this website and any such offering materials, the offering materials shall control. Securities shall not be offered or sold in any jurisdiction in which such offer or sale would be unlawful unless the requirements of the applicable laws of such jurisdiction have been satisfied. Any decision to invest in securities must be based solely upon the information set forth in the applicable offering materials, which should be read carefully by qualified investors prior to investing. An investment with Knightsbridge is not suitable or desirable for all investors; investors may lose all or a portion of the capital invested. Investors may be required to bear the financial risks of an investment for an indefinite period of time. Qualified investors are urged to consult with their own legal, financial and tax advisors before making any investment. Knightsbridge is a private investment firm that offers investment services to Qualified Investors, Members and Institutions ONLY. Qualified Investors are defined as individuals who have met those Qualifications in the relevant jurisdictions. Members are defined as individuals who have been accepted into the Knightsbridge membership program. Institutions are defined as entities such as banks, pension funds, and hedge funds. If you are not a Qualified Investor, Member or Institution, you are not eligible to invest with Knightsbridge. All investments involve risk, and there is no guarantee of profit. You may lose some or all of your investment. Past performance is not indicative of future results. Knightsbridge is not a registered investment advisor, and this disclaimer should not be construed as investment advice. Please consult with a qualified financial advisor before making any investment decisions. By accessing this website, you agree to the terms of this disclaimer. Thank you for your interest in Knightsbridge.