"Lower crude oil prices" push Saudi Aramco's 2019 net profit to $88.2bn

The net income was also affected by declining refining, chemical margins and impairment associated with Sadara Chemical

The company posted an average total hydrocarbon production of 13.2 million barrels per day of oil equivalent in 2019.
Saudi Aramco
The company posted an average total hydrocarbon production of 13.2 million barrels per day of oil equivalent in 2019.

Tadawul-listed oil and gas giant Saudi Arabian Oil Company (Saudi Aramco), which is the world’s biggest oil producer, has recorded a 20.6% decline in 2019 net income to $88.2bn (SAR330.7bn) compared to $111.1bn (SAR416.5bn) in 2018, with the plunge being attributed to “lower crude oil prices and production volumes”.

In a stock market filing the company said that the decrease in net income was also affected by declining refining and chemical margins and a $1.6bn (SAR6bn) impairment associated with Sadara Chemical Company, which is jointly owned by Aramco and The Dow Chemical Company.

The company posted a free cash flow of $78.3bn (SAR 293.6bn), compared to $85.8bn (SAR321.8bn) in 2018, due to lower income that was balanced by capital expenditures and favourable working capital movements.

Saudi Aramco paid total dividend of $73.2bn (SAR274.5bn) in 2019. The dividends of $3.9bn (SAR14.6bn) will be paid on 31 March 2020 to registered shareholders as of 18 March 2020.

The oil giant’s capital expenditure in 2019 was $32.8bn (SAR123bn), compared to $35.1bn (SAR131.6bn) in 2018. Meanwhile, the company expects a capital spending for 2020 between $25bn (SAR93.8bn) to $30bn (SAR112.5bn) based on the volatility in commodity price.

Commenting on the results, president and CEO of Saudi Aramco, Amin H. Nasser, said: “2019 was an exceptional year for Saudi Aramco. Through a variety of circumstances – some planned and some not – the world was offered unprecedented insight into Saudi Aramco’s agility and resilience.”

“These strengths, combined with a strong balance sheet and a disciplined and flexible approach to capital allocation, allow us to underpin our goal of sustainably growing free cash flow to support dividends to our shareholders despite continued volatility of markets.”

“The recent COVID-19 outbreak and its rapid spread illustrate the importance of agility and adaptability in an ever-changing global landscape. This is central to Saudi Aramco’s strategy and we will ensure that we maintain the strength of our operations and our finances.

Nasser stressed that the company has “taken steps to rationalise” its “planned 2020 capital spending”.

In 2019, Saudi Aramco remained one of the world’s largest producers of crude oil and condensate with an average total hydrocarbon production of 13.2 million barrels per day of oil equivalent. Meanwhile, the company’s total hydrocarbon reserves under the Concession Agreement in 2019 were 258.6 billion barrels of oil equivalent (boe), compared to 256.9 billion boe in 2018.

The company stated in the filing that its emergency response training and procedures helped restore production levels within 11 days, following the attacks on two of its facilities in September 2019.

In February 2020, Saudi Aramco secured the regulatory approval for the development of the Jafurah unconventional gas field in the Eastern Province. The field will be gradually developed in phases and production on Phase 1 is slated to begin in early 2024.

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