Energy giant Saudi Aramco on Tuesday posted a 44.6% slump in third-quarter profit, as the coronavirus pandemic weighs heavily on the global demand for crude oil.
The behemoth, the world’s most valuable listed company, posted a net profit of 44.21 billion Saudi riyals (US$11.79 billion), compared to $21.3 billion in the same period last year.
The results are in line with analysts’ expectations but stand in contrast to the losses reported by Aramco’s rivals, which are reeling from pandemic-driven economic shutdowns that have suppressed energy requirements.
Aramco’s net profit for the first nine months of this year also dropped 48.6% to $35.02 billion, the company said.
Although the results underscore a downbeat oil market, Aramco’s July-September results showed an improvement compared to the second quarter, when it posted a profit of $6.57 billion.
“We saw early signs of a recovery in the third quarter due to improved economic activity, despite the headwinds facing global energy markets,” Aramco’s chief executive Amin Nasser said in the statement.
“We continue to adopt a disciplined and flexible approach to capital allocation in the face of market volatility. We are confident in Aramco’s ability to manage through these challenging times and deliver on our objectives.”
Nasser said Aramco was committed to delivering a dividend of $18.75 billion to shareholders for the third quarter – an amount that exceeds the declared profit.
The announcement is in line with the company’s pledge before its much-hyped IPO last year to pay a dividend of $75 billion for 2020.
“Aramco’s dividend payout is now much bigger than its income,” said Tarek Fadlallah, chief executive officer of the Middle East unit of Nomura Asset Management.
“Not a problem if oil rebounds next year. But it will be a big problem if it doesn’t,” he added.
Dividend payments from Aramco, seen as the kingdom’s cash cow, help the Saudi government manage its widening budget deficit.
Aramco was listed on the Saudi bourse last December following the world’s biggest initial public offering, generating $29.4 billion for 1.7% of its shares.
Last month, several oil giants including ExxonMobil and Chevron reported another quarter of red ink as uncertainty over oil demand forced the energy sector to rein in spending.
By contrast, Aramco’s results reflected its “resilience,” Nasser said.
But the Saudi energy giant is bracing for a possible further wave of coronavirus infections that could undermine a tentative global economic recovery and erode the demand for crude worldwide, analysts say.
The company has cut its capital spending this year and also slashed hundreds of jobs as it seeks to reduce costs, Bloomberg News reported in June.
Saudi Arabia, the world’s biggest crude exporter, has been hit hard by the double whammy of low prices and sharp cuts in production.
A sharp drop in oil income is expected to hinder Crown Prince Mohammed bin Salman’s ambitious plans to overhaul the kingdom’s energy-reliant economy.