World's biggest company Saudi Aramco to stick with dividend pay-out despite profit slump

Even with oil prices having slumped, Saudi Aramco said it still intends to give at least $75bn (€67bn) to shareholders this year.

The world’s biggest company by market value, which listed in the Saudi Arabian capital of Riyadh in December, will pay the dividends on a quarterly basis, it said in its 2019 financial results released on Sunday.

Capital expenditure will be cut to between $25bn and $30bn this year, from $32.8bn in 2019.

Even so, the firm would still needs at least $100bn to meet its dividend and capital expenditure commitments alone, almost matching its 2019 payments.

The spread of the coronavirus and the oil-price war instigated by Saudi Arabia after Russia rejected co-ordinated production curbs has sent Brent crude prices spiraling.

They have fallen more than 50% since the end of December to around $32 a barrel, and some analysts predict they’ll drop further to below $10 a barrel.

Low oil prices would crimp Aramco’s earnings and hurt Saudi Arabia’s finances. The kingdom’s royalties dipped more than 12% in 2019 and it needs an oil price of $84 to balance this year’s budget.

Aramco’s shares lost 2.8% as of 11:25 a.m. in Riyadh on Monday to 27.90 riyals, a record low on a closing basis and 13% down from the listing price.

Aramco will be able to achieve a free cash flow of $63bn in 2020, according to Riyadh-based Al Rajhi Capital.

That calculation assumes the company pumps 10.7 million barrels per day and Brent crude prices average $30 a barrel.

Raising debt is an option as borrowing costs are low and the company is still within its debt-to-equity ratio of 5%-15%.

The yield on Aramco’s $3bn bond due in 2029 has climbed this month amid a global sell-off of emerging-market assets, but at 3.64% is barely higher than when the debt was issued in April.

The Saudi government could also cut its own dividend allocations while paying private shareholders, which own around 1.5% of the company, their portion of the $75bn.

Aramco’s profit slumped 21% in 2019 to 331 billion riyals (€79bn) because of lower oil prices and production. Drone and missile attacks on two major facilities in September temporarily slashed its supply by more than half.

Verity Ratcliffe and Anthony Dipaola, Bloomberg