Saudi Aramco's Profit Plunges 73.4%, Deepening Budget Crisis

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Saudi Aramco logo is pictured at the oil facility in Khurais, Saudi Arabia
Saudi Aramco logo is pictured at the oil facility in Khurais, Saudi ArabiaCredit: REUTERS/Maxim Shemetov/File Photo

Saudi state oil group Aramco (2222.SE) on Sunday reported a 73.4% fall in second-quarter net profit, a steeper drop than analysts had forecast, and said it expected capital expenditure for 2020 to be at the lower end of a $25 billion to $30 billion range.

The world’s biggest oil exporter said the rapid spread of COVID-19 globally had significantly reduced demand for crude oil, natural gas and petroleum products.

Saudi Arabia, OPEC’s de facto leader and the world’s top oil exporter, relies heavily on crude revenues. The International Monetary Fund has said Riyadh needs oil at $80 a barrel to balance its 2020 budget, which carries a deficit of 187 billion riyals ($50 billion). Oil was trading at $41 a barrel in August of 2020.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies,” CEO Amin Nasser said in a statement.

Net profit fell to 24.6 billion riyals ($6.57 billion) for the quarter to June 30 from 92.6 billion riyals a year earlier.

Analysts had expected a net profit of 31.3 billion riyals in the second quarter, according to the mean estimate from three analysts, provided by Refinitiv.

All major oil companies have taken a hit in the second quarter as lockdowns to contain the coronavirus limited travel, which hurt oil demand and sent oil prices LCOc1 tumbling to levels not seen in nearly two decades.

Brent crude prices at the end of the second quarter were down 38% from a year earlier, despite an agreement by OPEC+ producers to cut oil supply by a record 9.7 million barrel per day from May to help to shore up prices and curb oversupply. [O/R]

Aramco said it would distribute a dividend of $18.75 billion for the second quarter of this year, in line with its plan to pay a base dividend of $75 billion for 2020.

BP (BP.L) earlier this month cut its dividend for the first time in a decade after a record $6.7 billion second-quarter loss, while Royal Dutch Shell (RDSa.L) in April cut its dividend for the first time since World War Two

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