Saudi Arabia’s state-owned oil company Saudi Aramco is bracing for a tougher year after suffering from an income fall in 2019. The oil price war with Russia and weak oil demand due to the coronavirus are expected to make 2020 a harsh fiscal year for Saudi Aramco.
Aramco’s net profit slumped 21% from $111.1 billion in 2018 to 330.69 billion riyals ($88.1 billion) in 2019. Despite the decline, the oil giant remained the world’s most profitable company, generating more profit than Apple Inc’s $55 billion profit last year.
During its first earnings calls as a public company, Aramco announced a plan to cut spending from $32.8 billion in 2019 to $25 billion-$30 billion this year to deal with lower oil prices. Aramco said 2019 presented a difficult macroeconomic environment. The Saudi state oil and gas conglomerate reported an 8% fall from 2018 in its net revenues to $294.9 billion in 2019.
The coronavirus outbreak has pushed oil prices lower from a peak of $65-$72/barrel in January amid geopolitical tensions between the US and Iran. The collapse in OPEC+ pact put further weight on prices, which now hover around $30/barrel.
Aramco, however, promises to increase its cash dividends. This move is seen as Aramco’s attempt to appease shareholders who saw shares declined to below the IPO price. Following the OPEC+ collapse, Saudi Aramco’s market capitalization fell by $320 billion to $1.44 trillion. The company’s shares decreased to $7.73/share on March 9, below its IPO price of $8.53/share.
