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After IPO, Saudi Aramco profits plummet

March 15, 2020

The state-run oil giant posted a full-year profit of $88.12 billion due to lower crude oil prices and production volumes. The results are well below expectations and come just three months after its record-setting IPO.

Saudi Aramco logo
Image: Getty Images/B. Pugliano

Saudi Arabia's state-run oil giant on Sunday announced a 21% drop in its 2019 profit.

Saudi Aramco says it achieved a full-year 2019 net profit after tax and Islamic law charges (zakat) of $88.12 billion (€$77.1 billion), compared with $111.1 billion in 2018.

The fall was much higher than analysts expected, which the company said: "was primarily due to lower crude oil prices and production volumes, coupled with declining refining and chemical margins."

Read more: Oil price war: Saudi Arabia, US, Nigeria among big losers

Oil’s new price war: The battle of the barrel

Aramco also noted a $1.6 billion impairment associated with Sadara Chemical Company, its joint venture with the US Dow Chemical Company.

Total revenues, including other income related to sales, were 1.106 trillion riyals ($294.7 billion; €264 billion) in 2019, down from 1.194 trillion riyals the year prior.

Record IPO overshadowed

The plunge in profits comes just three months after the energy giant set a new initial public offering (IPO) record, beating the Chinese e-commerce giant Alibaba Group Holdings' listing in 2014.

Aramco raised $25.6 billion from the sale of just 1.5% of its shares — a move that formed part of Crown Prince Mohammed bin Salman's strategy to steer the country's economy away from reliance on oil.

The firm's shares rallied 19% after the December 11 listing, lifting the company's valuation above the $2 trillion mark.

But as oil prices subsequently tumbled, Aramco shares have followed suit and are now below their listing price.

Read more: Saudi Arabia to hike oil output capacity by 1 million barrels per day

On Thursday, the firm's market value dropped to around $1.55 trillion, but it still remains the world's largest publicly listed company, beating Western oil majors such as Exxon Mobil, and also Apple.

Aramco, which supplies around 10% of the world's oil, said it would cut capital expenditure in 2020 due to market conditions as a result of the coronavirus outbreak, as well as "recent commodity price volatility" — alluding to the lower oil prices.

Read more:  Saudi Arabia burnishes reform image with women's football league

Price war to cause more pain

Saudi Arabia and Russia are locked in a fierce price warthat has sent oil markets into a tailspin.

Over the past two weeks, crude prices have plunged 25% — the sharpest decline seen since the 1991 Gulf War.

The standoff was triggered by Moscow's refusal to agree on additional output cuts to support prices dented by the coronavirus outbreak.

Riyadh responded with a massive production hike and the biggest cuts to prices in two decades, moving to snatch some of Russia's market share.

mm/nm (AFP, Reuters)

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