Aramco sticks with dividend even as profit plunges
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The world's biggest oil exporter said the rapid spread of Covid-19 globally had significantly reduced demand for crude oil.
PHOTO: REUTERS
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DUBAI • Saudi Arabia's state-controlled oil giant is pressing ahead with a plan to pay US$75 billion (S$103 billion) in dividends this year even as profit slumped and debt surged, with the kingdom battling a widening budget deficit.
Saudi Aramco, which Apple recently dethroned as the world's most valuable listed company, said net income in the three months ending in June was 24.6 billion riyals (S$9 billion), down 73 per cent from a year earlier.
A statement yesterday said Aramco will pay a dividend of US$18.75 billion for the quarter, most of it to the government, which owns around 98 per cent of the company's stock.
"Strong headwinds from reduced demand and lower oil prices are reflected in our second-quarter results," said chief executive officer Amin Nasser.
"We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies."
The results cap a turbulent period for the biggest oil exporter in the world. Prices briefly turned negative in the United States in April as virus lockdowns battered the global economy and Aramco slashed hundreds of jobs.
Saudi Arabia and Russia subsequently led a push by Organisation of the Petroleum Exporting Countries and its partners to reduce production and prop up crude prices. Though they have rallied, Brent is still down 33 per cent this year.
Rivals including BP and Royal Dutch Shell have cut their dividends.
Saudi Arabia generates most of its revenue from crude, and its budget deficit is set to exceed 12 per cent of gross domestic product this year, according to the International Monetary Fund. That would be the widest since 2016, adding pressure on Aramco to maintain dividend payments.
Aramco's shares rose 0.3 per cent to 33.05 riyals in Riyadh as of 12.25pm yesterday. They have declined 6.2 per cent this year, much less than the likes of Exxon Mobil, which has fallen 38 per cent, and Shell, down 50 per cent.
Aramco has yet to draw on a US$10 billion revolving credit facility, Mr Nasser said. The company said in June that it might issue more bonds or loans to meet its dividend commitment.
Capital expenditure will be at the lower end of the US$25 billion to US$30 billion range it set in March, according to yesterday's statement.
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