Aramco to cut capital spending in 2020

Dubai

Saudi Aramco yesterday said it plans to cut capital spending in the wake of the coronavirus outbreak, as it posted a 21 per cent decline in 2019 net profit due to a drop in oil prices and production, its first earnings announcement as a listed company.

The world’s most profitable company and by far its biggest oil producer, Aramco listed its shares in Riyadh in December in a record $29.4 billion initial public offering that valued it at $1.7 trillion.

Aramco CEO Amin Nasser said in a statement the oil giant has taken steps to rationalise planned capital spending in 2020 following the coronavirus outbreak.

The company expects capital spending for 2020 to be between $25 billion and $30bn in light of current market conditions and recent commodity price volatility, compared to $32.8bn in 2019.

Brent crude futures last traded at $33.85 per barrel on Friday, down from about $64 when Aramco listed its shares. Despite a drop in income, Aramco said it paid a dividend of $73.2 bn in 2019 and intends to declare a cash dividend of $75 bn in 2020, paid quarterly.

Aramco, which is 98 per cent owned by the Gulf kingdom, reported a net profit of $88.2 bn in 2019, down from $111.1 in 2018. Analysts had expected Aramco to post a net profit of 346.6 bn riyals ($92.6 bn) in 2019, according to an estimate of 15 analysts polled by Refinitiv.

Last week Aramco said it would launch a programme to boost production capacity for the first time in more than a decade, signaling to Russia and other rivals it was ready for a long battle over production levels and market share.

Aramco said the drop in earnings was mainly due “lower crude oil prices and production volumes, coupled with declining refining and chemical margins, and a $1.6 bn impairment associated with Sadara Chemical Co.” “The decrease was primarily due to lower crude oil prices and production volumes, coupled with declining refining and chemical margins,” it said.

“2019 was an exceptional year for Saudi Aramco. Through a variety of circumstances -- some planned and some not -- the world was offered unprecedented insight into Saudi Aramco’s agility and resilience,” CEO Amin Nasser said.

“Our unique scale, low costs, and resilience came together to deliver both growth and world-leading returns, while also maintaining our position as one of the world’s most reliable energy companies,” Nasser said.

The earnings for last year are not affected by the coronavirus outbreak or the ongoing price war between Saudi Arabia and Russia that has sent oil prices crashing. “The recent COVID-19 outbreak and its rapid spread illustrate the importance of agility and adaptability in an ever-changing global landscape,” Nasser said.

Aramco remains the world’s most profitable company, beating Western oil majors such as Exxon Mobil Corp, and Apple Inc, which made $55 bn in its last financial year that ended in September.

Aramco said it generated total revenues, including other income related to sales, of 1.106 trillion riyals in 2019, down from 1.194 trillion riyals the year earlier. Aramco said it had total hydrocarbon production of 13.2 million barrels per day of oil equivalent in 2019, compared to 13.6 m barrels per day of oil equivalent in 2018.