Saudi Aramco profits plunge as virus batters oil demand

Saudi Aramco's net income has plunged by 50 percent in the first half of the year.

Profits for the first six months of the year plunged to $23.2 billion, half of last year’s $46.9 billion for the same time period.

The results were announced on Sunday as Aramco's second quarter earnings dipped to $6.6 billion compared to $24.7 billion during the same time last year, reflecting a staggering 73 percent drop.

The figures offered a revealing glimpse into the impact of the coronavirus pandemic on one of the world's biggest oil producers.

Five other leading oil firms – BP, Chevron, ExxonMobil, Royal Dutch Shell and Total – recently reported combined losses of $53 billion for the second quarter.

READ MORE: Saudi Arabia's state oil company is going public. What's the big deal?

Impacts of oil prices 

The majority state-owned company's financial health is crucial to Saudi Arabia's stability.

Despite massive efforts by Saudi Crown Prince Mohammed bin Salman to diversify the economy, Saudi Arabia still depends heavily on oil exports to fuel government spending.

The price of Brent crude hovers just under $45 a barrel, significantly less than before the pandemic but up from a low of around $21 a barrel in April.

Aramco CEO Amin Nasser acknowledged the company's finances were impacted by “strong headwinds from reduced demand and lower oil prices" sparked by the pandemic, which halted flights around the world and plunged economies into recession, including Saudi Arabia's.

The company said it will uphold its commitment to pay out dividends of $18.75 billion for the second quarter as part of its promise to pay $75 billion in annual dividends.

Nasser described Aramco's half-year earnings as “solid” and credited the company's low production costs and operational strength, which helped it to maintain its promised dividend payments.

READ MORE: Saudi Aramco raises IPO to record $29.4B by over-allotment of shares

Second most valuable company

Aramco was listed on the Saudi bourse in December following the world's biggest IPO, generating $29.4 billion for 1.7 percent of its shares.

US technology firm Apple last week replaced it as the world's most valuable company after its capitalisation grew to $1.9 trillion, compared to $1.76 trillion for Aramco.

Nasser said Aramco would distribute $18.75 billion in dividends for the second quarter to keep its listing promise of distributing at least $75 billion in annual dividends for five years.

"We are committed to d elivering sustainable dividends through market cycles, as we have demonstrated this quarter," Nasser said in a media call, according to Bloomberg News.

"Our intention is to pay $75 billion, subject to board approval, of course, and market conditions."

Aramco, which floated a sliver of its shares on the local Saudi stock market last year, had long kept its financial details a closely-held secret until the company began preparations for its market debut.