Oil tanks at an oil processing facility owned by Saudi Aramco, a state owned oil company in Saudi Arabia, at the Abqaiq oil field.
Stanislav Krasilnikov | TASS via Getty Images
Saudi Aramco’s net profit fell 44.6% in Q3 2020 from the same period last year, reflecting continued damage to oil demand and prices due to the global coronavirus pandemic.
Net profit fell to 44.21billion riyals ($ 11.8 billion) this quarter from 79.84 billion riyals in Q3 2019.
The figure is in line with analysts’ estimates, showing that a rebound from the historic drop in second-quarter revenue plunged profits to riyals 24.75 billion.
Saudi Arabia’s state-owned oil company has seen lower crude prices and sales volumes, as well as weaker refining and chemical margins, the company said in a statement. on Tuesday. It has also seen reductions in oil-producing royalties, tax rates reductions from 20% to 15%, and lower income taxes and zakat (Islamic tax).
The national producer maintained a third-quarter dividend of $ 18.75 billion, to be paid in the fourth quarter. Its second quarter dividend was announced at the same level in August, which will also be paid out next quarter. Aramco’s first quarter dividend is paid in the second quarter.
Aramco listed a 1.5% local stake in Saudi Tadawul last year, which analysts say has reshaped many of the company’s priorities, including shareholder engagement.
“Aramco issued this very strong dividend commitment to shareholders as part of the IPO,” Neil Beveridge, senior oil and gas analyst at Bernstein, told CNBC “Capital Connection” on Tuesday.
“And that’s really a fundamental promise I think, for any investor investing in Saudi Aramco and that’s what … the company will want to keep, on track. committed in the IPO. “
Like almost all oil producers, the company announced a significant cut in capital spending as crude prices fell due to a pandemic. Capex in Q3 was $ 6.4 billion, with projects including a $ 20 billion conversion of crude oil into chemicals with Saudi Arabia Basic Industry Corporation (SABIC) suspended or be “reevaluated”.
“Aramco is doing everything to increase efficiency and reduce costs, but that is not necessarily related to increasing capital investment,” Beveridge said. “Keep in mind that a lot of capital expansion plans have been envisaged to revolve around capacity enhancement and that capacity is simply unnecessary in the market right now, so I am.” Thinking downsizing is the right thing to do. “
Aramco said it expects capital spending to be lower between $ 25 billion and $ 30 billion for 2020, compared with $ 32.7 billion for 2019.