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Saudi Aramco profits take 73 per cent plunge

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Saudi Aramco posted a net profit of $6.6 billion for the three months to June 30, down 73 per cent compared to $24.7 billion in the same period last year. SAUDI ARAMCO/AFP

Saudi Aramco profits take 73 per cent plunge

Energy giant Saudi Aramco on Sunday said its second-quarter profits plunged a massive 73 per cent due to sharply lower oil prices as the coronavirus crisis undercuts global demand.

The behemoth, recently dethroned by Apple as the world’s most valuable listed company, posted a net profit of $6.6 billion for the three months to June 30 compared to $24.7 billion for the same period 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 novel coronavirus pandemic.

Aramco CEO Amin Nasser said in a statement: “Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results.

“Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce and unrivalled financial and operational strength.”

Aramco’s net profit for the first half of this year also slumped by 50.5 per cent to $23.2 billion, compared to $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, Chevron, ExxonMobil, Royal Dutch Shell and Total – recently reported combined losses of $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 $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.

Cutbacks

But amid low crude prices, Aramco is looking at cutting its 2021 budget by between eight and 10 per cent 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 $25 billion to $30 billion range” this year.

That is significantly lower than its expenditure of $32.8 billion last year, Energy Intelligence reported.

It said: “Cutbacks have already caused Aramco to delay plans to expand production from its offshore fields.

“The offshore programme was a core element of a push to raise the company’s oil production capacity.”

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.

A sharp drop in oil income is expected to hinder Crown Prince Mohammed bin Salman’s ambitious plans to overhaul the kingdom’s energy-reliant economy.

Oil prices dropped to a two-decade low below $20 per barrel in April and May as the coronavirus dampened demand, before recovering to around $44 per barrel after the Opec+ producers agreed to record output cuts.

Following the move, Saudi oil production dropped to 7.5 million barrels per day (bpd) in June, compared to last year’s average of 10 million bpd.

Aramco’s profits were also impacted by the losses posted by the Saudi Basic Industries Co. (Sabic), the petrochemicals giant it acquired for $69 billion in a deal completed this year.

The energy giant is bracing for a possible further wave of coronavirus infections that could impact a tentative global economic recovery and erode the demand for crude worldwide, analysts say.

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

US technology firm Apple last week replaced it as the world’s most valuable company after its capitalisation grew to $1.9 trillion, compared to $1.76 trillion for Aramco.

Nasser said Aramco would distribute $18.75 billion in dividends for the second quarter to keep its listing promise of distributing at least $75 billion in annual dividends for five years.

“We are committed to delivering sustainable dividends through market cycles, as we have demonstrated this quarter,” Nasser said in a media call, as reported by Bloomberg News.

“Our intention is to pay $75 billion, subject to board approval, of course, and market conditions.”

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