Saudi Arabia’s oil giant Saudi Aramco has seen its profits dive 45% due to the impact of the pandemic on global oil markets.
In spite of the staggering drop, Saudi Aramco was still able to report a profit of $49 billion, and will continue to pay its shareholders dividends valued at more than $75 billion.
The reporting of profits was likely due to a rally for the oil market in the second half of the year as global economies began to recover from the COVID-19 pandemic and return to somewhat normal production levels.
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The company announced that “Aramco achieved a net income of $49 billion in 2020,” which was down nearly half from the $88.2 billion that Saudi Aramco made in 2019. “Revenues were impacted by lower crude oil prices and volumes sold, and weakened refining and chemicals margins,” it said.
Saudi Aramco’s CEO, Amin Nasser labelled the year of 2020 as “one of the most challenging years in recent history,” adding that the company out-performed a number of its competitors and displayed “strong financial resilience.”
“We are pleased that there are signs of a recovery,” Nasser told investors in a call. “China is also very close to pre-pandemic levels. So in Asia, East Asia in particular, there is a strong pick-up in demand.”
Saudi Aramco decreased its capital expenditure in 2021 from $45 billion, to $35 billion last year, and according to Tadawul bourse, capital spending in 2020 stood at $27 billion.
Nasser forecasts that amid a roll-out of the COVID-19 vaccine, demand for oil in the United States and Europe will return to levels last seen in the pre-pandemic period.
Saudi Aramco expects this demand will reach 99 million barrels of oil per day by the conclusion of 2021.
Oil prices have recovered from near record lows in March and April of 2020, where a barrel of oil could be bought for around USD $20. Since then, the price of oil has increased three-fold to where it sits today, at $61.
Saudi Aramco Profits Dive 45% as COVID-19 Pandemic Staggers Industry and Economies
Oil analysts have said that the company increased its debt levels in order to maintain a shareholder dividend last year as its earnings were dropping dramatically.
Hasnain Malik, head of research at Tellimer has told Al Jazeera that “the dividend is in line with expectations, which is what holders of Aramco will care about most, but lower capex implies the company does not expect high oil prices for the long-term,”
Saudi Aramco CEO said “as the enormous impact of the COVID-19 was felt throughout the global economy, we intensified our strong emphasis on capital and operational efficiencies.”
Key to these operational efficiencies was the purging of hundreds of jobs from its workforce in June, 2020.
