Saudi Aramco’s earnings plummet after Covid-ravaged yr and maintain dividend up

A worker at an oil processing plant for Saudi Aramco, a Saudi Arabian state oil and gas company, in the Abqaiq oil field.

Stanislav Krasilnikov | TASS | Getty Images

Oil giant Saudi Aramco reported a 44% drop in full-year 2020 results but maintained its dividend payout of $ 75 billion. CEO Amin Nasser described the last twelve months as one of the “most challenging years” in recent history.

Saudi Aramco, Saudi Arabia’s giant state-owned oil company, posted net income of $ 49 billion in 2020, up from $ 88.19 billion in 2019. Earnings were slightly below analysts’ expectations of $ 48.1 billion, but is still the highest of all listed companies in the world.

“In one of the most challenging years in recent history, Aramco has demonstrated its unique value proposition through considerable financial and operational agility,” said Amin Nasser, chief executive of Saudi Aramco, in a statement from the company on Sunday.

Aramco said sales were impacted by lower crude oil prices and volumes sold, as well as weaker margins in refineries and chemicals.

The company also expects to cut investments in the coming year, slashing its spending forecast from $ 40 billion to $ 45 billion to around $ 35 billion.

Free cash flow was down nearly 40% to $ 49 billion, well below the level of the highly anticipated dividend. Aramco also declared a $ 75 billion payout for 2020, despite fears it would take on additional debt to keep it up.

“Looking ahead, our long-term strategy to optimize our oil and gas portfolio is on track. As the macro environment improves, we see a pickup in demand in Asia and positive signs in other countries,” he added.

Shares in leading Western oil and gas companies, including Royal Dutch Shell and BP, fell to multi-year lows in 2020 as the coronavirus pandemic devastated the global economy and sparked historic oil prices. Exxon Mobil, the largest US energy company, posted its first annual loss.

Escalating attacks on oil facilities

Aramco’s facilities have been the target of several attacks by the Houthi rebels in Yemen – attacks that escalated this year, with Saudi Arabia and Iran, the latter of which supports the rebels, opposing the sides of the bloody civil war in Yemen.

Houthi rocket bursts in parts of Saudi Arabia, which hit Aramco’s facilities in early March, briefly brought the price of oil above USD 70 a barrel to the highest level in more than a year. Most recently, the rebels took responsibility for drone attacks on an Aramco plant in the capital Riyadh on Friday, which led to a fire that, according to the Saudi energy ministry, was quickly brought under control without any losses.

When asked how the company wanted to reassure investors and the global community that its infrastructure was well protected and ready to prevent serious business disruptions, CEO Amin Nasser said the attacks had “no business impact.”

“I think the most important thing is the willingness of our employees,” Nasser told CNBC during a press conference after the results were released. “There is always something you learn from every attack and you go out and improve your emergency response … and you make sure you have what it takes to restore these facilities if they are attacked.”

“We learned a lot and were able to prove with a reliability of 99.9% that we are able to put the system back into operation in every scenario, to guarantee the safety of our employees and to guarantee this at the same time.” The deliveries to our customers are fulfilled, “added Nasser.

“The attack on Riyadh is a good demonstration. Within hours of putting the fires out and completing the investigation, we started (re) operating the facility,” he said. “The Riyadh refinery went live today. This is a demonstration of the capabilities and contingency plan and emergency response of the first responders.”

Nasser was also optimistic about the outlook for oil demand in 2021.

“We have seen prices improve, with demand picking up and recovery much better. China is also very close to pre-pandemic levels,” said the CEO.

“As the use of vaccines increases, we will see a stronger pick-up in demand, so we are very optimistic about demand growth, especially in the second half of the year, and we can see that prices so far are responsive to what we see in the market We look forward to a much better year in 2021. ”

The international benchmark for Brent crude is $ 64.53 a barrel, up 25% year-to-date and a whopping 73% year-over-year.

Several oil analysts have raised their 2021 price predictions for vaccine and demand confidence. Goldman Sachs is forecasting a spike to $ 80 a barrel by the third quarter of this year – something unimaginable when WTI prices went negative for the first time in history about one year ago.

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