Saudi Aramco to rein in 2020 spending as pandemic hits H1 earnings

SINGAPORE (ICIS)–State-owned energy giant Saudi Aramco will continue to rein in capital spending this year following a plunge in first-half earnings caused by slumping oil prices amid the coronavirus pandemic.

“Aramco continues to implement its capital spending optimization and efficiency program, and expects capital expenditure to be at the lower end of the $25 billion to $30 billion range for 2020,” the company said in a statement.

The target range for 2020 is lower than last year’s capex of $32.8bn.

In the second quarter, Aramco’s capital spending stood at $6.2bn, with the first-half figure at $13.6bn, the state-owned energy giant said.

“The COVID-19 [coronavirus disease 2019] pandemic has spread rapidly throughout the world, resulting in substantial reductions in consumer and business activity and significantly reduced demand for crude oil, natural gas and petroleum products,” Aramco said.

The Saudi energy giant’s second-quarter net profit slumped due to a combination of oil price slump and falling refining and chemical margins.

in billion Saudi riyal (SR)	Q2 2020	Q2 2019	% change	H1 2020	H1 2019	% change
Sales	123.2	286.8	-57.0	348.8	556.1	-37.3
Operating income	53.1	181.3	-70.7	182.8	347.9	-47.5
Net income	24.6	92.6	-73.4	87.1	175.9	-50.5

“Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results,” Aramco president and CEO Amin Nasser said in a statement.

Lockdowns implemented to contain the pandemic have plunged the global economy into a deep recession. These pandemic-containment measures are being lifted gradually amid continued spikes in global coronavirus infections.

“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.

The novel coronavirus outbreak, which started in China late last year, has so far infected more than 19m globally, with the death toll at more than 700,000 as of 9 August, according to data from the World Health Organization (WHO).

Saudi Aramco intends to continue pursuing its long-term growth and diversification strategy, which included more downstream investments.

In June 2020, the company completed the $69.1bn acquisition of a 70% stake in Saudi petrochemical major SABIC, which incurred heavy losses in the first half of the year.

“The acquisition enhances Aramco’s existing downstream portfolio, accelerates its petrochemicals growth, increases existing chemicals volumes and expands its international reach,” Aramco said.

The world’s biggest crude exporter has declared a second-quarter dividend of $18.75bn, which will be paid out in the third quarter.

($1 = SR3.75)

Focus article by Pearl Bantillo

Photo: Saudi Aramco CEO Amin Nasser at the World Energy Congress in Abu Dhabi, UAE. 10 September 2019 (By Jon Gambrell/AP/Shutterstock)

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