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Saudi Aramco’s $75 billion dividend survived one of the biggest disruptions in oil markets in decades as the coronavirus pandemic and a price war sent crude prices tumbling.
Aramco’s payouts almost all go to the Saudi Arabian government, whose budget deficit widened in 2020 after the virus hammered energy markets and shut down businesses across the kingdom.
The world’s biggest oil company has taken on more debt in the past 12 months to keep up the dividend in the face of dwindling cash flow, though its gearing remains below that of Big Oil firms such as Royal Dutch Shell Plc.
Net income for 2020 was 184 billion riyals ($49 billion), slightly above analysts’ expectations and down 44% from the previous year. Free cash flow slumped almost 40% to $49 billion, substantially below the level of the dividend.
Cautious on Oil
Aramco expects capital expenditure this year to be $35 billion, down from previous guidance of as much as $45 billion. That signals it remains cautious on the outlook for oil markets despite prices climbing 25% since the end of December to about $65 a barrel.
The new forecast is still higher than Aramco’s $27 billion of investment spending in 2020.
The company, based in Dhahran in eastern Saudi Arabia, said that energy consumption was increasing in some regions -- including its main market of Asia -- as the global economy recovers.
“Our long-term strategy to optimize our oil and gas portfolio is on track and, as the macro environment improves, we are seeing a pick-up in demand in Asia and also positive signs elsewhere,” Chief Executive Officer Amin Nasser said in a statement.
- Profit: 183.8 billion riyals in 2020 vs 330.7 billion in 2019
- Revenue: 768 billion riyals vs 1.11 trillion
- Operating profit: 383 billion riyals vs 675 billion
- Free cash flow: 184 billion riyals vs 294 billion
Drone Attacks
The company’s stock has risen 0.6% this year to 35.20 riyals, giving it a market value of about $1.9 trillion, second only to Apple Inc. That compares with a 9% increase in Saudi Arabia’s benchmark Tadawul index.
Investor concern is rising over an increase in drone and missile attacks on Aramco’s facilities, most of them claimed by Yemen’s Houthi rebels but which Saudi officials say have Iranian involvement.
Read more: Saudi-Led Jets Strike Houthi Targets in Yemen After Aramco Hit
On Friday morning, Aramco’s 120,000-barrel-a-day refinery in the capital Riyadh was targeted with missiles. Though the attack caused no damage or loss of life, it followed similar assaults on the company’s Ras Tanura export terminal and a fuel depot in Jeddah earlier in the month.
— With assistance by Shaji Mathew