Aramco’s payments to the Saudi Arabian government fell by 30% last year, even as the company maintained its $75bn dividend, with the coronavirus pandemic sending crude prices tumbling.
The world’s biggest oil producer transferred 413bn riyals ($110bn) to the state in 2020 in the form of dividends, royalties and income taxes, Aramco has said in a financial statement. The money is a crucial source of revenue for the government, whose budget deficit widened last year as the economy went into recession.
Aramco, 98% state-owned, kept its pledge to pay the $75bn dividend, the largest of any listed company. But royalties and taxes more than halved to around $41bn.
Aramco’s debt swelled to $162bn at the end of 2020 after the company took on $90bn of loans and bonds. Its net debt-to-equity ratio surged to 55% from 26% at the end of 2019. Many of those liabilities were used to fund a $69bn acquisition of chemicals maker Sabic from the Saudi sovereign wealth fund. The government charges Aramco a royalty fee on every barrel of oil it produces, helping the state generate income on top of the taxes and dividends. Royalties slumped as the payments are linked to crude prices, which fell about 20% last year.
The company is “very optimistic” about prospects for the oil market in 2021, chief executive officer Amin Nasser said last Monday on a call with analysts, forecasting an increase in demand, and consequently output. The company aims to channel most of its investment into oil and gas production this year.
Most of Aramco’s profit comes from its upstream business, which includes production of those hydrocarbons. That business posted a 40% decline in earnings before interest, tax and zakat – the local charitable contribution – to $110bn in 2020.
The downstream division, which includes refining, chemicals and retail fuel sales, posted a loss of $5.4bn on an Ebitz basis, wider than its 2019 loss of $927mn. Aramco is seeking to almost double its refining capacity this decade and aims to be a global leader in chemicals, helped by the Sabic acquisition.
Last year Aramco reshuffled its downstream business, which last made a profit in 2018, and created a separate division focused on “portfolio optimization” to scrutinize the company’s existing assets and develop plans to tap growing markets.
Oil tanks are seen at Saudi Aramco’s Ras Tanura oil refinery and oil terminal (file). Aramco’s debt swelled to $162bn at the end of 2020 after the company took on $90bn of loans and bonds.
