The Saudi oil giant will keep spending in checks, but the payout is crucial for the kingdom, which holds about 98% of the company
CEO of Saudi Aramco, Amin Nasser. Picture: REUTERS/HAMAD I MOHAMMED
The payout is crucial for the kingdom, which holds about 98% of Aramco and is facing its worst financial turmoil in decades as revenue falls. On Monday, the government tripled VAT and cut bureaucrats’ allowances as it looks to rein in a fiscal deficit that could reach 13% of GDP this year. The war over market share started just as the first quarter was ending, and the effect of low prices will probably be more pronounced in the second quarter. It was in April that benchmark prices turned negative in the US for the first time.
Aramco’s income declined 25% year on year to 62.48-billion riyals between January and March, less than the consensus forecast of about $17.5bn. Refining swung to a loss before earnings and tax are included, while production operations earned almost $38bn. Aramco continues to forecast between $25bn and $30bn of capital spending this year but expenditure for 2021 is under review, it said.
Aramco has already decreased spending to protect shareholder payouts. The Dhahran-based company said in March that it would limit capital expenditure to $30bn in 2020, down from previous plans to spend as much as $40bn.
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