Saudi state oil group Aramco’s profit plunged 73% in the second quarter of the year, as a slump in energy demand and prices due to the coronavirus crisis hit sales at the world’s biggest oil exporter.
All major oil companies have taken a hit in the second quarter as lockdowns to contain the coronavirus limited travel, which reduced oil consumption and sent prices tumbling to levels not seen in nearly two decades.
Aramco, which listed in Riyadh last year in a record $29.4 billion flotation, said the rapid spread of COVID-19 globally had significantly reduced demand for crude oil, natural gas and petroleum products.
“The COVID-19 crisis is unlike anything the world has experienced in recent history and we are adapting to a highly complex and rapidly changing business environment,” CEO Amin Nasser said in a statement on Sunday.
“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies,” Nasser said.
Aramco 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.
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.
“Aramco figures are healthy compared to other global peers,” Mazen al-Sudairi, head of research at Al Rajhi Capital, said. “This was the worst quarter in the modern history of oil industry, and surviving it with healthy figures points to a very positive outlook.”
Aramco shares were up 0.4% in early trade. The group is currently the world’s second most valuable publicly traded company after Apple which overtook the oil group to take the number one slot in terms of market value earlier this month.
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.
The group’s dividends play a critical role in helping the Saudi government to manage its fiscal deficit.
BP 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 in April cut its dividend for the first time since World War Two.
Aramco’s free cash flow stood at $6.1 billion in the second quarter and $21.1 billion for the first half of 2020, respectively, compared to $20.6 billion and $38.0 billion for the same periods in 2019.
Aramco’s gearing ratio was 20.1% at the end of June, mainly reflecting the deferred consideration for the acquisition of Saudi Basic Industries Corp and the consolidation of SABIC’s net debt on to Aramco’s balance sheet.