Saudi Aramco has announced that its net income in the first quarter of 2020 stood at $16.66bn, a decline of almost 25 per cent from the profit of $22.21bn made in the same period last year.

The Saudi energy giant attributed the drop in profits to lower crude oil prices, as well as declining refining and chemicals margins and inventory re-measurement losses.

“This was partially offset by a decrease in production royalties, mainly resulting from lower crude prices, and a decrease in crude royalty rates from 20 per cent to 15 per cent, in addition to higher revenue relating to the price equalisation income on gas products,” Aramco said in a financial statement on 12 May.

The company’s shares opened at SR31 on the Saudi Stock Exchange (Tadawul) on 12 May, and were trading at SR31.10 as of 11am Riyadh time, on the back of the financial results announcement.

Meanwhile, Saudi Arabia’s Energy Ministry has asked Aramco to reduce its crude oil production in June “by an extra voluntary amount of 1 million barrels per day, in addition to the reduction committed by the kingdom in the latest Opec+ agreement,” the official Saudi Press Agency (SPA) reported.

Under the Opec+ deal that came into effect from 1 May, Saudi Arabia has pledged to cut its oil production to 8.5 million b/d.

With the voluntary additional reduction in June, the kingdom could be producing 7.492 million b/d next month, according to a Saudi Energy Ministry official, cited by SPA.

Capital expenditure

Aramco’s capital expenditure in the first quarter of the year marginally rose to $7.4bn from $7.2bn in the same period last year.

The company has kept its capex budget between $25bn and $30bn for the whole of 2020, unchanged from the previous spending guidance for the year, announced in March as part of the 2019 financial results. “Capital expenditures for 2021 and beyond remain under review,” Aramco reiterated in its statement.

“During the first quarter, we took steps to further optimise our planned 2020 capital spending and identified opportunities to improve operational productivity,” Aramco CEO Amin Nasser said.

“We retain significant flexibility to adjust expenditures and have considerable experience in managing the business through times of adversity. This resilience will enable us to continue delivering on our commitments to our shareholders,” he added.

Financial highlights

Aramco paid total dividends of $13.4bn in the first quarter of 2020 for the fourth quarter of 2019. Dividends of $18.75bn for the first quarter of 2020 “are the highest of any listed company worldwide and will be paid in the second quarter,” the company said.

Aramco’s cash flow from operating activities was recorded at $22.4bn in the first quarter of 2020, compared to $24.5bn in the same period of 2019. The impact of declining crude oil prices and refining and chemicals margins “was partially offset by favourable movements in working capital”.

Free cash flow was robust at $15.0bn in the first quarter, compared to $17.4bn in the same period last year.

The company’s balance sheet “remains strong” and gearing ratio decreased from -0.2 per cent on 31 December 2019 to -4.9 per cent on 31 March 2020.