DUBAI (Reuters) – Saudi Arabia’s state-run oil giant Saudi Aramco announced a drop in its 2019 profit of nearly 21% on Sunday, falling well below analysts’ expectations just three months after selling shares to the public in a record-setting IPO.
The decision last year to float shares in the world’s most profitable company was a central part of Crown Prince Mohammed bin Salman’s economic and political reform agenda. Its first profit statement since the IPO shows it was already performing below expectations months before the coronavirus pandemic, which has hammered global oil prices.
Below are key facts about Aramco and its 2019 results:
OIL COLOSSUS DIPS BELOW IPO
Aramco’s initial public offering in December became the world’s largest, raising $25.6 billion – pulling ahead of Alibaba Group Holding Ltd’s previous record $25 billion listing in 2014.
It valued the company, which supplies around 10% of the world’s oil, at $1.7 trillion, which fell short of the massive $2 trillion valuation long sought by Crown Prince Mohammed.
Last Sunday, Aramco’s shares fell below the IPO price of 32 riyals ($8.53) for the first time, ending the day at 30 riyals. The slump came after a Saudi-Russian oil price war that followed the collapse of a longstanding agreement to curb output.
Its shares traded at around 28.9 riyals on Sunday, around 0.3% below the previous session.
Aramco posted a full-year 2019 net profit after zakat and tax of $88.12 billion, falling 20.6% from $111.1 billion in 2018.
The decrease, below analysts’ expectations of around $92.6 billion, “was primarily due to lower crude oil prices and production volumes, coupled with declining refining and chemical margins, and a $1.6 billion impairment associated with Sadara Chemical Company,” the company said.
Total revenues, including other income related to sales, were 1.106 trillion riyals in 2019, down from 1.194 trillion riyals the year prior.
Aramco remains the world’s most profitable company, beating Western oil majors such as Exxon Mobil Corp, and Apple Inc, which made $55 billion in its last financial year that ended in September.
ADJUSTING CAPITAL SPENDING
The company said it would cut capital expenditure in 2020 due to market conditions as a result of the coronavirus outbreak, as well as “recent commodity price volatility” – alluding to the lower oil prices.
Aramco expects capital spending this year to be between $25 billion and $30 billion, down from $32.8 billion in 2019 and $35.1 billion in 2018. It said its expenditure for 2021 and beyond is under review.
It said it would pay out $75 billion in dividends in 2020. Total dividend payments were $73.2 billion in 2019.
PRODUCTION AND RESERVES
The company produced 13.2 million barrels of oil equivalent per day (boed) last year versus 13.6 boed produced in 2018.
Aramco had total proven hydrocarbon reserves of 258.6 boe in 2019, slightly below 256.9 billion boe in 2018.
Following an attack in September that initially halved production, the company restored output levels in 11 days, it said in its results statement.
In 1938, explorers from the Rockefeller family’s Standard Oil Company struck oil in Saudi Arabia. The venture became known as the Arabia American Oil Company and crude oil production hit 500,000 barrels per day in 1949.
The Saudi government bought out all the original shareholders and fully controlled the company by 1980.
Crown Prince Mohammed, Saudi Arabia’s day-to-day leader, says he aims to diversify the economy away from oil.