Saudi Aramco’s 2019 income was equal to that of Apple, Samsung Electronics and Exxon Mobil combined/Bloombergby Bloomberg
Saudi Aramco said that it still intends to give at least $75 billion to shareholders this year despite an oil slump that is being intensified by plunging demand and the oil-price war led by Saudi Arabia and Russia.
In its 2019 financial results, the world’s biggest company by market value, which listed on Tadawul in December 2019, stated that it will pay the dividends on a quarterly basis.
Capital expenditure will be slashed to between $25 billion and $30 billion 2020 from $32.8 billion in 2019, but the firm would still need at least $100 billion to meet its dividend and capex commitments alone, almost matching its 2019 payments.
The spread of the coronavirus and the oil-price war instigated by Saudi Arabia after Russia rejected coordinated production curbs has sent Brent crude prices spiralling. They have fallen almost 55 per cent since the end of December 2019 to barely $30 a barrel and some analysts predict they’ll drop further to below $10.
Low oil prices would constrain Saudi Aramco’s earnings and hurt Saudi Arabia’s finances. The Kingdom’s royalties dipped more than 12 per cent in 2019 and it needs an oil price of $84 to balance this year’s budget.
Raising debt is an option as borrowing costs are low and the company is still within its debt-to-equity ratio of five to 15 per cent. The yield on Saudi Aramco’s $3 billion bond due in 2029 has climbed this month amid a global selloff of emerging-market assets, but at 3.76 per cent is not much higher than when the debt was issued in April 2020.
The government could also cut its dividend allocations while paying private shareholders, which own around 1.5 per cent of the company, their portion of the $75 billion. Drone attacks on two major facilities in September 2019 temporarily slashed its supply by more than half.
Despite the fall, the energy producer is still the world’s biggest company by market value and the most profitable. Saudi Aramco’s 2019 income was equal to that of Apple, Samsung Electronics and Exxon Mobil combined.