Saudi Aramco Keeps Record $18.75 Billion Dividend Payment Intact Despite Profits Slump

Oil giant Saudi Aramco has posted a 25% plunge in first quarter profits in the wake of global crude demand declines caused by the coronavirus or Covid-19 pandemic and a short-lived price war with Russia.

Posting its financials on Tuesday (May 12), the Saudi state giant said net profit slumped to 62.48 billion riyals ($16.64 billion) after state and religious taxes for the quarter to March 31, down from 83.29 billion riyals ($22.17 billion) a year earlier.

The figure came in well below average analyst expectations of $18 billion as oil prices plunged nearly 66% during the quarter, with much of the declines coming in March following the collapse of OPEC+ and a short-lived price war with Russia.

Forced by dire near-term demand in the wake of the pandemic, producers from OPEC and beyond headed back to the negotiating table and announced a cut of 9.7 million barrels per day (bpd) starting from May to support the market and address oversupply.

Aramco’s CEO Amin Nasser said the results reflected “lower crude oil prices, as well as declining refining and chemicals margins.”

“Looking ahead to the remainder of 2020, we expect the impact of the Covid-19 pandemic on global energy demand and oil prices to weigh on our earnings. We continue to reinforce the business during this period by reducing our capital expenditure and driving operational excellence. Longer term we remain confident that demand for energy will rebound as global economies recover.”

Despite the challenging operating climate, Aramco – which was listed on the Saudi Stock Exchange as recently as last year – opted to keep its dividend. It paid total dividends of $13.4 billion in the first quarter for payouts announced in the fourth quarter of 2019, and has lined up dividends of $18.75 billion will to be paid in the second quarter for first quarter pledges.

The pledges keep it in line for a $75 billion payout in 2020, and are “the highest of any listed company worldwide.”

The majority state-owned company’s cash flow from operating activities came in at $22.4 billion in the first quarter, compared with $24.5bn in the same period of 2019.

While it continues to expect capital spending for 2020 to be between $25 billion and $30 billion, Aramco said spending would be reviewed given market challenges. Capital expenditure in the first quarter stood at $7.4 billion, compared to $7.2 billion for the same period in 2019.

The national oil giant also reaffirmed plans to acquire a stake in Saudi petrochemical maker SABIC for $70 billion remain on track to close in the second quarter despite prevailing headwinds.

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