Net profit of Saudi Aramco has fallen by 25%

Saudi Aramco has reported a fall in net profit by 25% in the first quarter. The figure was mainly affected by the April drop in oil prices, and global reduction of demand for fuel.

In the report the company reported that net profit dropped to 62.5 billion riyals (16.6 billion dollars) in the first three months of the year, compared to 83.3 billion rials in the same period in 2019. 

The oil giant said that it would pay a dividend of 18.75 billion dollars in the first quarter, despite a drop in profits. the Company has committed to pay an annual $ 75 billion of dividends over five years as part of its decision to IPO, and it seems that the company does not intend to deviate from that plan, despite the reduction in capital expenditures.

Its free cash flow in the first quarter amounted to 56.3 billion riyals, against 65.1 billion riyals in the same period last year.

«the Crisis from Covid-19 not similar to anything that the world had experienced in recent history, and we have to adapt to very complex and rapidly changing business environment," — said the President and CEO of Aramco Amin Nasser.

"Aramco has demonstrated resilience over many economic cycles and has an unprecedented situation due to the strong balance sheet and low cost structure" — he added.

Yesterday, Saudi Arabia announced to reduce oil production by one million barrels a day in June (equivalent to 1% of world production) to strengthen the markets. This is in addition to already agreed in April cuts by OPEC members+.

The April transaction took place after oil prices fell amid the pandemic of shrinking demand and a temporary competition in the oil market Saudi Arabia and Russia, which began in early March after the parties were unable to agree on production cuts to increase prices for black gold. This dispute led to the fact that Saudi Arabia increased production and exports, and reduced its selling prices for buyers to increase their market share.

The reduction, announced Monday, means that Saudi Arabia will produce 4.8 million barrels per day less than in April. According to the Saudi Ministry of energy, the lowest figure over the past 20 years. United Arab Emirates and Kuwait followed suit and also announced further reductions.

Saudi Aramco made in December its first public offering of a shares, temporarily reaching a market capitalization of $ 2 trillion dollars on the second day of trading. But at that period the price of oil was at $ 65 per barrel.

Although the overall assessment was seen as a victory for Saudi crown Prince Mohammed bin Salman, which led the IPO, it is still not enough international interest that I was hoping for the Kingdom, relying instead on local investors after the company canceled the overseas road-show in London and new York. 

Ellen Wald, President of Transversal Consulting and author of the book Saudi Inc., noted that revenues for the first quarter of the year, include only the first few weeks of the crisis, which has hit the oil markets in early March.

Materials on this topic can also be read:
Saudi Aramco’s first-quarter profit slides 25% as the collapse in oil prices bites (CNBC)

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