Aramco earnings up in Q3, but still far less than last year

DUBAI, UNITED ARAB EMIRATES (AP) — Saudi Arabia’s oil and gas giant Aramco announced yesterday third quarter profits of nearly USD12 billion, a significantly higher net income from its dramatically lower second quarter earnings.

Still, its third quarter earnings of USD11.8 billion are down nearly 45 per cent compared to last year’s USD21.3 billion for the same quarter.

Aramco, like other energy producers globally, is wading through a tough year amid the coronavirus outbreak, which has seen countries impose various forms of lockdowns and travel restrictions that ultimately impact the demand for oil.

The company, which is mostly state-owned, said it produced the equivalent of 9.2 million barrels per day of crude oil for the first nine months of the year.

The price of Brent crude hovers just under USD39 a barrel, significantly less than before the pandemic but up from a low of around USD21 a barrel in April.

Aramco’s third quarter earnings are notably higher than it’s second quarter earnings of USD6.6 billion, reflecting the higher summer demand for oil as countries began easing restrictions, particularly in countries like China and India that are among Saudi Arabia’s top oil importers.

File photo shows Saudi Arabia’s state-owned oil company Aramco and stock market officials during the official ceremony marking the debut of Aramco’s initial public offering (IPO) on the Riyadh’s stock market. PHOTO: AP

Aramco CEO Amin H Nasser said the company “saw early signs of a recovery in the third quarter due to improved economic activity, despite the headwinds facing global energy markets.”

He attributed the company’s overall strength in part to its low production costs, which at under USD3 a barrel is among the cheapest in the world.

The global outlook for the winter, however, is far from certain with countries like the United States (US) and across Europe experiencing a sharp rise in coronavirus cases. Major cities in Europe have announced new lockdown measures and curfews to stem the alarming spread of the virus.

Aramco’s net income had plunged by 50 per cent in the first half of the year, with profits for the first six months dipping to USD23.2 billion.

The company has vowed, though, to uphold its commitment to pay out dividends of USD18.75 billion for the third quarter as part of its promise to pay USD75 billion in annual dividends to shareholders. Aramco floated a sliver of its shares on the local Saudi stock market last year, with the rest of its shares still owned by the state.

The Saudi-based Jadwa Investment said the country’s fiscal deficit of nearly USD11 billion during the third quarter pushed its year-to-date deficit to USD49 billion.

The government projects a full year gap between spending and revenue to reach USD79.5 billion.

Despite oil revenue being sharply down, government revenue was up four per cent in the third quarter compared to last year. That’s in part because of Aramco’s sizeable dividend payouts and a tripling of value-added taxes this year to 15 per cent on consumer goods and services.

Jadwa Investment noted, however, that government expenses rose seven per cent year-on-year in the third quarter due largely to spending on subsidies, grants and social services aimed at supporting the private sector and citizens against the pandemic’s economic fallout.