TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

Saudi Aramco's profit plunges, sees signs of oil market recovery

Saeed Azhar and Rania El Gamal (Reuters)
Dubai, UAE
Mon, August 10, 2020

Share This Article

Change Size

Saudi Aramco's profit plunges, sees signs of oil market recovery A picture taken on September 15, 2019 shows an Aramco oil facility at the edge of the Saudi capital Riyadh. Saudi Arabia raced today to restart operations at oil plants hit by drone attacks which slashed its production by half, as Iran dismissed US claims it was behind the assault. The Tehran-backed Huthi rebels in neighbouring Yemen, where a Saudi-led coalition is bogged down in a five-year war, have claimed thi weekend's strikes on two plants owned by state giant Aramco in eastern Saudi Arabia. (AFP/Fayez Nureldine )

S

tate oil giant Saudi Aramco’s profit plunged 73 percent in the second quarter of the year, as a slump in energy demand and prices due to the coronavirus crisis hit sales at the world’s biggest oil exporter.

But the company stuck with plans to pay US$75 billion in dividends this year and CEO Amin Nasser said global oil demand was recovering.

All major oil companies have taken a hit in the second quarter as lockdowns to contain the coronavirus limited travel, which reduced oil consumption and sent prices tumbling to levels not seen in nearly two decades.

Aramco, which listed in Riyadh last year in a record $29.4 billion flotation, said the rapid spread of COVID-19 globally had significantly reduced demand for crude oil, natural gas and petroleum products.

Nasser told reporters he had seen a partial recovery in the energy market and a pick up in demand as economies gradually open after the easing of coronavirus lockdowns.

“Look at China, their gasoline and diesel demand is almost at pre-COVID 19 levels. We are seeing that Asia is picking up and other markets [too],” he told reporters after announcing the company’s quarterly results.

“As countries ease the lockdown, we expect the demand to increase.”

Nasser said Aramco was committed to its 2020 dividend.

“We intend to pay the $75 billion, subject to board approval and market conditions,” he said.

The group’s dividends play a critical role in helping the Saudi government to manage its fiscal deficit.

Aramco reported a 73.4 percent fall in second-quarter net profit, a steeper drop than analysts had forecast, and said it expected capital expenditure for 2020 to be at the lower end of a $25 billion to $30 billion range.

Net profit fell to 24.6 billion riyals ($6.57 billion) for the quarter to June 30 from 92.6 billion riyals a year earlier.

Analysts had expected net profit of 31.3 billion riyals, according to the mean estimate from three analysts, provided by Refinitiv.

“Aramco figures are healthy compared to other global peers,” Mazen al-Sudairi, head of research at Al Rajhi Capital, said. “This was the worst quarter in the modern history of oil industry, and surviving it with healthy figures points to a very positive outlook.”

Aramco shares were up about 0.4 percent in early trade. The group is currently the world’s second most valuable publicly traded company after Apple.

Aramco said it will pay a dividend of $18.75 billion for the second quarter of this year, in line with plans for a $75 billion dividend for 2020.

BP earlier this month cut its dividend for the first time in a decade after a record second-quarter loss, while Royal Dutch Shell in April cut its dividend for the first time since World War Two.

Aramco’s free cash flow stood at $6.1 billion in the second quarter and $21.1 billion for the first half of 2020, respectively, compared with $20.6 billion and $38.0 billion for the same periods in 2019.

Aramco’s gearing ratio was 20.1 percent at the end of June, mainly reflecting the deferred consideration for the acquisition of Saudi Basic Industries Corp and the consolidation of SABIC’s net debt on to Aramco’s balance sheet.

{

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.