Aramco Chairman and CEO Amin Nasser in November 2019.Hamad I Mohammed / Reuters
The pandemic has dealt a severe bite in the income statement of the world's largest oil company, Aramco.
The Saudi state firm obtained a profit of 49,000 million dollars in 2020 (41,000 million euros), 44% less than a year before, according to figures published this Sunday.
Despite the drop in earnings - which would have been much higher if prices had not recovered strongly in the second half of the year - the company has chosen to keep the dividend at high levels at the cost of increasing its already large debt.
Shares of the Dhahran-based company closed the session this Sunday, a working day in the Desert Kingdom, with a slight rise of 0.6% despite the fact that the market expected somewhat better results.
In just two years, Saudi Aramco's profit has gone from more than $ 111 billion to less than $ 50,000.
Although it has the advantage of having one of the lowest extraction costs in the world, an extensive network of refineries and one of the most prolific profit and loss accounts for decades, its future position is complicated for two reasons.
First, because an entire country, Saudi Arabia, depends almost entirely on the good performance of its jewel in the crown to finance public spending that, far from diminishing, continues to grow.
Second, because its diversification plans towards a world in which renewables will dominate the energy matrix are several bodies behind its main US and, above all, European competitors.
Aramco: the Saudi giant makes the box jump
The green exodus of the owners of 'black gold'
The strong recovery in the price of oil in recent months, in which oil has gone from around zero dollars to just over 60, has given wings to the price of the main firms in the sector, some of the most affected in Stock market during the pandemic.
Aramco is no exception: since the lows of March last year, its shares have recovered just over 20% of their value.
However, this rise should be put into perspective: much of the stabilization of prices is attributable to the strategy of the OPEC export cartel, led by Saudi Arabia itself, to turn off the supply tap to rebalance the market.
The International Energy Agency forecasts that oil demand this year will average 96.5 million barrels a day, about three million less than in 2019, when the health crisis was not on any roadmap.
In this context, we must frame the figures published this Sunday by Aramco, a company that at the end of 2019, when it took 2% of its capital onto the market, surpassed Apple to become - for weeks - the largest listed company in the world.
Pumps from the Saudi oil company - a giant that alone contributes about a tenth of global supply - fell last year to 9.2 million barrels a day, its lowest level since 2011. At that time, the West was still trying After healing the wounds left by the Great Recession,
US
fracking
producers were operating at full throttle and energy efficiency was lower than it is today.
More debt to maintain the dividend
In an environment marked from start to finish by uncertainty - how long will restrictions on mobility be necessary to contain the spread of the virus ?;
To what extent will the new variants bypass vaccines? - Aramco will invest in 2021 close to 35,000 million dollars, 10,000 million less than expected, but also 8,000 million more than in the turbulent 2020, in which the price of crude oil arrived to enter negative territory for the first time in history.
The decline in earnings, a trend that practically no analyst thinks will reverse in the near future, has left Aramco with a single formula - unorthodox - to maintain its dividend: increase debt.
Why?
To a large extent, this strategy has to do with the income needs of the Saudi state, by far its largest shareholder and highly dependent on oil revenues.
One piece of information says everything about this anomaly: while the company's free cash flow amounted to 49,000 million dollars (almost 40% less than in 2019), the amount distributed among shareholders remained above 75,000 million.
The 44.4% drop in the oil company's profit contrasts, moreover, with the drop only slightly more than 30% in the oil revenues of the Saudi Government.
Asia, cause for optimism
Aramco has spent years depositing part of its future in the good performance of the Asian market, by far the fastest growing region —economic and demographic— on the planet.
And, with Europe still paralyzed by lockdowns and the United States waiting for the rain of millions of public money to revive the economy, that is one of the few green shoots.
"We are very optimistic about 2021, especially in the second half of the year," said its chief executive, Amin Nasser, in the presentation of results this Sunday.
“We see signs of recovery.
Chinese [demand] is already very close to pre-pandemic levels and, particularly in East Asia, there is a strong recovery in demand. "
The Saudi firm is China's largest supplier of crude oil, a position it hopes to maintain for the next five decades.
Its future is today, more than ever, linked to that of the second world power.