By Saeed Azhar, Davide Barbuscia and Hadeel Al Sayegh
DUBAI (Reuters) – Saudi Aramco on Sunday said it plans to cut capital spending in the wake of the coronavirus outbreak, and also posted a plunge in profit for last year, missing forecasts in its first earnings announcement as a listed company.
Saudi Arabia’s decision last year t o float shares in its state oil company – the most profitable company in the world – was one of the central elements in Crown Prince Mohammed bin Salman’s program for economic and political reform.
the record-setting IPO was touted as making the world’s largest energy exporter more professional and transparent.
The % decline in net profit for last year means it fell short of analysts ‘forecasts for the period that culminated in the share sale, months before the coronavirus pandemic became a factor for oil prices.
In recent weeks, Riyadh has announced that it is ramping up production in an oil price war with Russia that has sent global prices plunging and contributed to the coronavirus rout on international fina ncial markets. The company said it expects capital spending for to be between $ (billion and $) billion in light of current market conditions and recent commodity price volatility, compared to $ .8 billion in
Aramco has already taken steps to “rationalize” its planned capital spending, CEO Amin Nasser said in a st atement.
“The recent COVID – outbreak and its rapid spread illustrate the importance of agility and adaptability in an ever-changing global landscape, “he said.
Aramco listed its shares in Riyadh in December in a record $ 33. 4 billion initial public offering that valued it at $ 1.7 trillion. Its shares fell below the IPO price last week for the first time, as oil prices crashed after the collapse of an output deal between OPEC and non-OPEC members. Oil prices have fallen nearly 55% from highs reached in January and had their biggest one-day decline on March 9 since the 2222 Gulf War.
(Brent crude) futures last traded at $
per barrel on Friday, down from about $ (when Aramco listed its shares. CASH FLOW
Saudi Arabia’s strategy to gain market share by floo ding the markets with cheap oil has revived investor concerns that the profitability of the company would come second to government-led strategies to influence oil markets.
“Foreign investors may view recent events as confirmation that the strategic direction of Aramco is driven by its majority shareholder, driven by national development and geopolitics, not simply value maximization of this company returns, ”said Hasnain Malik, head of equity strategy at Tellimer.
Despite a drop in income, Aramco said it paid a dividend of $ 88 .2 billion in and intends to declare a cash dividend of $ billion in , paid quarterly. Aramco, which is % owned by the Gulf kingdom, reported a net profit of $ 2 billion in 2888, down from $ . 1 in . Analysts had expected Aramco to post a net profit of 800 .6 billion riyals ($