World’s biggest oil firm Saudi Aramco suffered a 44% plunge

 Oil companies suffered during the last year due to significantly reduced consumer demand. Saudi Aramco recently reported that it experienced a 44% plunge in full-year 2020 results. Considering that this company is one of the biggest on the market and greatly influences Saudi-owned business, that news will have a serious impact on the market.

Still, the company managed to maintain its $75 billion dividend payout, which is good news. CEO Amin Nasser noted that the last twelve months were one of the most challenging years in recent history.

Overall, Saudi Arabia’s major oil company reported a net income of $49 billion in 2020; it was considerably lower than 2019’s $88.19 billion. Analysts expected a higher number, but Saudi Aramco still remains one of the biggest of any public company globally despite the hardships.

On Sunday, Saudi Aramco Chief Executive Amin Nasser stated that the company demonstrated its unique value proposition through its considerable operational and financial agility in one of the most challenging years in recent history.

According to Aramco, lower crude oil prices and volumes sold impacted revenues, weakening refining and chemicals margins.

What course will Saudi Aramco take for the next year?

The company may have to cut capital expenditure in the following year. It has already reduced its guidance for spending to around $35 billion while the range was from $40 billion to $45 billion previously.

Saudi Aramco also announced a payout of $75 billion for 2020, even though it may need to take on additional debt to maintain it. Meanwhile, free cash flow plummeted down by nearly 40% to $49 billion. That also poses a danger as it’s well below the level of its much-anticipated dividend.

Nasser noted that their long-term strategy to optimize their oil and gas portfolio is on track. As the macro environment improves, they hope that demand in Asia will increase again.

Royal Dutch Shell, BP, and other top western oil and gas companies’ shares plunged to multi-year lows in 2020. The Covid-19 pandemic caused a crisis across the global economy, sparking a historic collapse in the price of oil.

However, Nasser seems optimistic about the oil demand outlook in 2021. According to the CEO, they have seen improvement in prices and anticipate a much better recovery. He noted that with more deployment of the Covid-19 vaccines, the company would see more demand pickup. So, they are very optimistic about 2021 in terms of growth in demand. Furthermore, they can see the prices so far responding to what they are seeing in the market, and they are looking forward to a much better year in 2021.