Logo of Phnom Penh Post newspaper Phnom Penh Post - Saudi Aramco 2020 profits slump on lower crude prices

Saudi Aramco 2020 profits slump on lower crude prices

Content image - Phnom Penh Post
Aramco has been battered by low oil prices and a collapse in demand due to the coronavirus pandemic. AFP

Saudi Aramco 2020 profits slump on lower crude prices

Energy giant Saudi Aramco on March 21 posted a 44.4 per cent 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 CEO 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 possible further waves of coronavirus infections that could undermine a tentative global economic recovery.

As the global vaccination programme 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 and available cash flow.

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

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.

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

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

The full-year results are in line with analysts’ expectations. But given Aramco’s sliding revenue, market research firm Bernstein said its capital expenditure targets for this year were higher than expected.

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 per cent 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 March 19, in the second major assault this month on Saudi energy installations claimed by the Iran-backed insurgents.

MOST VIEWED

  • Angkor lifetime pass, special Siem Reap travel offers planned

    The Ministry of Tourism plans to introduce a convenient, single lifetime pass for foreign travellers to visit Angkor Archaeological Park and potentially other areas. The move is designed to stimulate tourism to the culturally rich province of Siem Reap as the start of the “Visit

  • Ice cream, noodles flagged over carcinogen

    The General Department of Customs and Excise of Cambodia (GDCE) has identified three types of instant noodles and ice cream trademarks originating from Thailand, Vietnam and France that are suspected to contain ethylene oxide, which poses a cancer risk to consumers. The general department has

  • Exclusive interview with Josep Borrell Fontelles, High Representative of the EU

    CAMBODIA is hosting the 55th ASEAN Foreign Ministers’ Meeting (AMM) and Related Meetings this week with top officials from the US, China, and Russia and other countries in the region slated to attend and to meet with face-to-face with their counterparts on the sidelines. In

  • Rise in Thai air routes to Siem Reap fuels travel hopes

    Local tourism industry players are eager for regional airline Bangkok Airways Pcl’s resumption of direct flight services between the Thai capital and Siem Reap town on August 1 – home of Cambodia’s awe-inspiring Angkor Archaeological Park – which is expected to boost the growth rate of

  • ASEAN Foreign Ministers’ meet commences, Taiwan issue possibly on table

    The 55th ASEAN Foreign Ministers’ Meeting (AMM) and related meetings hosted by Cambodia kicks off in Phnom Penh on August 3, with progress, challenges, and the way forward for the ASEAN Community-building on the table. Issues on Taiwan, sparked by the visit of US House Speaker

  • Recap of this year’s ASEAN FM meet and look ahead

    This year’s edition of the ASEAN Foreign Ministers’ Meeting (AMM) hosted by Cambodia comes against the backdrop of heightened global tensions and increasing rivalry between major powers that have been compared to the animosity of the Cold War era. The following is The Post’