Page 6 - MEOG Week 11
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MEOG FInanCe & InVestment MEOG
Aramco reports dip in profits, promises to “rationalise” capex
saudI arabIa
NET profits at Saudi Aramco were down 21% in 2019 as a result of low prices and production restrictions, the Saudi oil giant reported on march 15.
The national oil company (NOC) last week slashed its export prices and announced plans to ramp up production to put pressure on US shale drillers and force Russia to re-open supply talks. it said on Sunday it intended to “rationalise” its capital spending in response to the escalating coronavirus (COViD-19) crisis.
Aramco was reporting its first results since listing in December in a $29.4bn initial public offering (iPO) which valued the company as a whole at $1.7tn. its shares dipped below the list- ing price last week for the first time, following its pledge to flood the market after talks on sup- ply cuts with Russia and other members of the OPEC+ alliance of producers broke down earlier this month.
Aramco posted net income of $88.2bn in 2019, down from $111.1bn in 2019. The result disappointed, with a group of analysts polled by Refinitiv having forecast a net profit of SAR346.6bn ($92.6bn). Despite the decline, total dividend payments were $73.2bn in 2019 and the company plans a cash dividend of $75bn in 2020, to be paid quarterly. The NOC is 98% owned by theSaudistate.
Aramco blamed the dip in earnings on “lower crude oil prices and production volumes, coupled with declining refining and chemical margins.” it also booked a $1.6bn impairment relating to its Sadara Chemical joint venture with Dow Chemical of the US.
Revenue amounted to SAR1.106tn, down from SAR1.194tn a year earlier, while total hydrocarbon production averaged 13.2mn barrels of oil equivalent per day, versus 13.6mn
boepd in 2018.
Aramco CEO Amir Nasser said in a state-
ment that the producer was taking steps to rationalise its capital expenditure because of the COViD-19 pandemic, which has sapped global oil demand.
“The company expects capital expenditure for 2020 to be between $25bn and $30bn in light of current market conditions and recent commodity price volatility,” Aramco explained. “Capital expenditure for 2021 and beyond is cur- rently under review.”
Aramco’s capex came to SAR122.9bn last year, or $32.8bn, compared with SAR131.8bn in 2018.
The producer announced last week it would increase its oil output to 12.3mn barrels per day after OPEC+ restrictions expire at the start of April, after capping the level at 9.7mn bpd for much of this year. it later said it had received an order from Riyadh to ramp up production fur- ther to 13mn bpd.
Oslo-based Rystad Energy estimates that the kingdom might struggle to pump this much oil, however.
“The actual available crude production capacity Saudi Arabia would be willing and able to bring to the market on a sustainable basis is below12mnbpd,closerto11.5mnbpd,”thecon- sultancy’s oil market expert Bjoernar Tonhaugen said in a statement.
The highest amount the kingdom has pro- duced to date is a record 11mn bpd in Novem- ber 2018.
“The capacity addition announcement would not affect supply capacity in the short term or even this year, but could lead to higher invest- ments and oilfield service contracts if followed through by Aramco,” Tonhaugen said.
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w w w . N E W S B A S E . c o m Week 11 18•March•2020
