Page 6 - DMEA Week 32

DMEA COMMENTARY DMEA

Aramco income plummets,

along with oil price

The Saudi NOC has posted a massive drop in income, but still managed to turn
a profit, unlike most others in the industry

SAUDI ARABIA STATE-OWNED Saudi Aramco published its per day. Then in December, Aramco listed shares
first-half results this weekend, illustrating in on the local Tadawul stock exchange in a dras-
WHAT: part the financial pain Saudi Arabia brought tically pared-back initial public offering (IPO).
Aramco saw net profit fall upon itself by going to war with Russia over the This however, saw the firm become the world’s
by 50% during the first oil price earlier in the year. most valuable listed entity, a title it held until
half, year on year. Aramco’s net income for the six-month just a week before the Q2 results were published,
period was halved to $23.2bn from the $46.9bn when tech giant Apple took top spot.
WHY: achieved during the first half of 2019. The
Following Riyadh’s impact was displayed most clearly in the dispar- Self-harm
direction, the company ity between Q1 and Q2 net income, which were In its results, Aramco heralded hitting a single
ramped up oil output as $16.6bn and $6.57bn respectively. Meanwhile, day crude oil production target of 12.1mn bpd
part of a poorly timed oil the company’s free cash flow (FCF) fell nearly on April 2 when the company’s output increased
price war with Russia, $17bn year on year to $21.1bn during 1H 2020. above maximum sustainable capacity (MSC)
while demand plummeted Despite the challenges, Aramco did follow from several fields and crude flowed from stor-
amid the COVID-19 through with its $75bn full-year dividend com- age facilities. However, it failed to mention the
outbreak. mitment, paying its $18.75bn Q1 dividend dur- capitulation in output that followed when oil
ing Q2 and saying it would pay the Q2 dividend prices went into freefall as coronavirus (COVID-
WHAT NEXT: during the third quarter. However, with 98.5% of 19) ravaged demand while supplies continued
Cash is an inconvenient the company remaining under state control, only unabated.
concern for Aramco, $281.25mn is due to leave Saudi coffers. Middle East Oil & Gas (MEOG) understands
but having promised The results mark the latest in a string of that production fell to 7.5-8mn bpd during the
an unwieldly $75bn high-profile challenges the company has faced second quarter as the company sought to stem
dividend, it has had to over the past 12 months. In September last year, the bleeding and comply with OPEC+ cuts.
look to the markets to fill attacks at company facilities in Abqaiq and Total hydrocarbon production during the
the gap. Khurais saw oil flows reduced by 5.7mn barrels first half was 12.7mn barrels of oil equivalent per

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