Aramco Profits Down on Weak Prices, Output Cuts

Saudi oil giant Saudi Aramco has reported a 21% decline in net profits for 2019, owing to weaker prices and output restrictions.

Net income stood at $88.2bn, versus $111.1bn in 2018. Aramco blamed the drop on "lower crude oil prices and production volumes, coupled with declining refining and chemical margins."

Aramco restricted its hydrocarbon production to 13.2mn barrels of oil equivalent/day last year, compared with 13.6mn boe/day in 2018, because of Saudi Arabia's Opec+ commitments. The alliance of oil producers was unable to prop up oil prices last year, however, with Brent falling 10% to $64.3/barrel.

 Following the collapse of Opec+ talks earlier this month, Aramco has lowered its prices and announced plans to flood the market when the group's existing agreement on supply quotas expires at the start of April.

Aramco also pointed to a $1.6bn impairment charge relating to its Sadara Chemical joint venture with US partner Dow Chemical as a factor behind the dip in profits.

Despite the weaker performance, the national producer said it intended to declare cash dividends of at least $75bn in 2020, up from $73.2bn in 2019. The firm is 98% owned by the Saudi state.

However, Aramco said it would cap capital spending at $25-30bn in 2020, down from $32.8bn in 2019 and $35.1bn in 2018, "in light of current market conditions and recent commodity price volatility."

"The recent Covid-19 outbreak and its rapid spread illustrate the importance of agility and adaptability in an ever-changing global landscape," CEO Amin Nasser said in a statement. "This is central to Saudi Aramco’s strategy and we will ensure that we maintain the strength of our operations and our finances. In fact, we have already taken steps to rationalise our planned 2020 capital spending."