Survival of fittest as Aramco overshadows peers in tough year

Aramco revealed on Sunday that it had a net income of $49 billion for last year, but a detailed breakdown of its figures released on Monday showed it made $14.3 billion in the final quarter of the year, when industry giants such as Exxon Mobil and Royal Dutch Shell lost nearly $25 billion between them.

Other big oil majors including Chevron, Total, BP, and Equinor clocked up a meagre $1.5 billion in aggregate profits in the final quarter.

Some among Aramco’s international peer group reduced dividends and labor forces during the year of turmoil on global energy markets, but the Saudi oil giant stuck to the pledge it made to investors at the time of its initial public offering in 2019 to pay a minimum of $75 billion to shareholders.

Nasser said the company “displayed strong financial resilience in one of the most challenging periods for the industry, during which revenues were impacted by lower crude oil prices and volumes sold and weakened refining and chemicals margins.”

Revenues dropped by $100 billion to $230 billion in 2020, as oil prices collapsed in the course of the coronavirus disease (COVID-19) pandemic lockdowns and resulting fall in demand. Saudi Arabia led the way in reducing supply via a series of voluntary cuts in output, in addition to its reduction commitments under the OPEC+ alliance of producers’ agreements.

The huge importance of Saudi Aramco as an economic wealth generator for the Kingdom was underlined in the financial statements.

Royalties and other taxes paid to the government amounted to $23.99 billion in 2020, while income taxes and zakat totaled $50.3 billion, in addition to the dividends paid to the shareholders. Aramco also invested nearly $27 billion in the form of capital expenditure on its global operations last year.

In addition, the detailed financials revealed a jump in corporate borrowing in 2020, the year in which Aramco made the biggest acquisition in the country’s history with the $69 billion purchase of a 70 percent stake in petrochemicals giant SABIC.

For the year as a whole, the net debt to equity ratio – a standard measure used to assess the extent of liabilities – rose from 26 percent in 2019 to 55 percent last year.

“Saudi Aramco seeks to maintain a prudent capital structure, comprised of borrowings and shareholders’ equity, to support its capital investment plans and maintain a sustainable, growing dividend profile,” the statement said.

On the financial disclosures, oil analysts at Bank of America said: “Survival of the fittest – Aramco reported strong 2020 results that came in ahead of our estimates and consensus estimates on higher realizations globally.

“Importantly, the free cash flow in the fourth quarter almost covered Aramco’s minimum quarterly dividend despite an average $40 per barrel environment.”

Aramco shares – traded on the Tadawul exchange in Riyadh – on Monday traded close to a high for 2021 at SR35.50 ($9.47).