Aramco to slash capital spending this year, citing coronavirus

Saudi Arabia oil giant also said that net profits last year fell more than 20 percent.

OPEC coronavirus day 3
Aramco on Sunday reported its first annual financial results since the company went public late last year [File: Ahmed Jadallah/Reuters]

Saudi Aramco on Sunday said it plans to cut capital spending in the wake of the coronavirus outbreak, as it posted a 21-percent decline in 2019 net profit due to a drop in oil prices and production, its first earnings announcement as a listed company.

The world’s most profitable company, and by far its biggest oil producer, Aramco listed its shares in Riyadh in December in a record $29.4bn initial public offering (IPO) that valued it at $1.7 trillion.

Its shares fell below the IPO price last week for the first time as oil prices crashed after the collapse of an output deal between OPEC and non-OPEC members led to an oil price war between Riyadh and Moscow. Saudi Arabia has said it plans to ramp up production to gain market share.

Aramco CEO Amin Nasser said in a statement the oil giant has taken steps to rationalise planned capital spending in 2020 following the coronavirus outbreak.

The company expects capital spending for 2020 to be between $25bn and $30bn in light of current market conditions and recent commodity price volatility, compared with $32.8bn in 2019.

Brent crude futures last traded at $33.85 per barrel on Friday, down from about $64 when Aramco listed its shares.

Despite a drop in income, Aramco said it paid a dividend of $73.2bn in 2019 and intends to declare a cash dividend of $75bn in 2020, paid quarterly.

Aramco, which is 98-percent owned by the Gulf kingdom, reported a net profit of $88.2bn in 2019, down from $111.1bn in 2018.

Analysts had expected Aramco to post a net profit of 346.6 billion riyals ($92.6bn) in 2019, according to an estimate of 15 analysts polled by Refinitiv.

Last week Aramco said it would launch a programme to boost production capacity for the first time in more than a decade, signalling to Russia and other rivals it was ready for a long battle over production levels and market share.

Aramco said the drop in earnings was mainly due to “lower crude oil prices and production volumes, coupled with declining refining and chemical margins, and a $1.6 billion impairment associated with Sadara Chemical Co”.

Aramco remains the world’s most profitable company, beating Western oil majors such as Exxon Mobil Corp, and Apple Inc, which made $55bn in its last financial year that ended in September.

Aramco said it generated total revenues, including other income related to sales, of 1.106 trillion riyals in 2019, down from 1.194 trillion riyals the year earlier.

Aramco said it had total hydrocarbon production of 13.2 million barrels per day of oil equivalent in 2019, compared with 13.6 million barrels per day of oil equivalent in 2018.

Source: Reuters