The world’s largest oil producer Saudi Aramco is likely to cut its dividend payout to the Saudi government pressured by low oil prices and weak fuel demand amid the coronavirus pandemic during the first quarter of 2020, some analysts said. They also expected the oil giant to post lower earnings and a decrease in cash flows when reporting its first-quarter results due on Tuesday.
Saudi Aramco promised $75 billion of annual dividend for the first five years to attract investors to its massive IPO in December in 2019. Analysts forecast a 50% reduction in dividends to the government. Aramco, however, is expected to maintain 1.7% or about $1.3 billion of them which will go to minority shareholders.
Previously, Royal Dutch Shell also cut its dividend for the first time since the Second World War in an effort to ease constraints in its finance. Meanwhile, ExxonMobil, BP, and Chevron decided to keep their quarterly payouts.
Aramco also needs to pay $69 billion for the acquisition of a 70% stake in SABIC. The oil giant is reportedly seeking to cut the cost, Reuters reported. According to the payment terms, Aramco needs to pay $25 billion in 2020 to Saudi Arabia’s Public Investment Fund. Analysts said Aramco would be able to pay the acquisition through debt financing, in line with its original plan. As of the end of 2019, Aramco had $60 billion in cash, while debt is expected to reach $7 billion this year.
