Slumping oil demand, prices drive Saudi Aramco profit 44.6% lower

Saudi state oil giant says it will maintain its quarterly dividend payment of $18.75bn, most of which goes to the government.

An employee looks on at Saudi Aramco oil facility in Abqaiq
Saudi Aramco's profits have been ravaged by the slump in oil prices this year, but it plans to maintain its dividend payments to shareholders, including the Saudi government [File: Maxim Shemetov/Reuters]

Saudi Arabian state oil group Aramco has reported sharply lower earnings as crude prices slide while countries once again impose measures to curb the spread of the coronavirus.

The company, which launched the world’s biggest-ever public share sale last December, on Tuesday reported a 44.6 percent drop in third-quarter net profit, in line with analysts’ estimates.

Weaker refining and chemicals margins have also hit the company’s net profit, which fell to 44.21 billion riyals ($11.79bn) for the quarter ended September 30 from 79.84 billion riyals ($21.29bn) in the same period last year.

The latest figure was an improvement on the $6.57bn net profit in the second quarter, a 73.4 percent year-on-year plunge.

“We saw early signs of a recovery in the third quarter due to improved economic activity, despite the headwinds facing global energy markets,” Saudi Aramco Chief Executive Officer Amin Nasser said in a statement.

Maintaining dividend payments

The company said it would distribute a dividend of $18.75bn for the third quarter of this year, in line with its plan to pay a base dividend of $75bn for 2020.

Dividends from the world’s top oil-producing company play a critical role in helping the Saudi government manage its fiscal deficit.

Crude oil prices have fallen 41 percent from $66 per barrel at the end of 2019 to $38.75 on Tuesday.

Analysts had expected a net profit of 44.6 billion riyals ($11.9bn) in the third quarter, according to the mean estimate from three analysts, provided by Refinitiv.

Saudi Aramco net income chart [Bloomberg]
Saudi Aramco net income chart [Bloomberg] (Bloomberg)

Aramco’s shares rose 0.6 percent in early trading in Riyadh, paring this year’s drop to 2.4 percent.

Although the results suggest the worst of the pandemic’s effect on energy demand may have passed, Aramco still faces a brittle market. Oil prices fell to a five-month low this week amid fresh travel restrictions in Europe aimed at stemming a surge in virus cases.

The Organization of Petroleum Exporting Countries and allied producers – who agreed to slash crude exports in April – are weighing whether to delay an easing of those curbs to buttress crude prices.

Source: Al Jazeera and news agencies