Saudi Arabian state-owned oil company Aramco said on Sunday its 2020 net profit plunged a whopping 44.4 percent drop.
The profits of the oil giant were hit hard by lower crude oil prices and a drop in offtake by customers amid the Covid-19 induced economic lull around the world. Weak refinery margins also contributed to the fall in profits.
According to the company, net profit dropped to $49 billion (183.76 billion riyals) for the year that ended December 31. A year earlier the profits had stood at 330.69 billion riyals.
However, the plunge in profits was less than what analysts had expected. According to the mean estimate of analysts in Refinitiv's Eikon, Aramco's profits were to drop to 186.1 billion riyals.
Goal of Optimizing Oil and Gas Portfolio
Given the sharp plunge in profits, Aramco said it will reduce capital expenditure in the years ahead. The revised capex estimates stood at around $35 billion, a significant decrease from the range of $40 billion to $45 billion previously.
"Looking ahead, our long-term strategy to optimize our oil and gas portfolio is on track and, as the macro environment improves, we are seeing a pick-up in demand in Asia and also positive signs elsewhere," Aramco Chief Executive Amin Nasser said in a statement.
In line with the company's expectations, the crude prices have been inching up in recent months. Brent crude hit a dismal low of $20 in April 2020, in the aftermath of the global coronavirus outbreak and the lockdowns declared by countries around the world.
However, for the first time in about a year, Brent crude went past $60 a barrel in February. On Sunday crude traded even higher at $64, signaling a turnaround for the oil producers.
Aramco produced around 9.2 million barrels on an average per day through the last year, according to its annual results. It must be noted that Aramco's export targets are constrained by the voluntary production cap finalized in agreement with the OPEC+ coalition.
Though the profit decline was the sharpest in years, Aramco will keep its promise of paying paying quarterly dividends of $18.75 billion, which translates into $75 billion a year. Most of the Aramco dividend money goes to the Saudi Arabian government, which is still dependent on the petrodollars despite its ambition to diversify away from oil money.
"We remain confident that we will emerge on the other side of this pandemic in a position of strength," Nasser added.