Adds details on planned capacity expansion, dividend payment, downstream assets. Changes throughout.
State-controlled Saudi Aramco ended 2020 "in an exceptionally strong position" despite a 44.4pc fall in its net profits compared to 2019 caused the Covid-19 pandemic-induced demand shock, the company's chief executive Amin Nasser said today.
He expressed strong optimism about crude demand growth and price recovery this year.
"We are very optimistic about 2021. We have seen improvement in prices, with a pickup in demand and much better recovery. Demand from China is even higher than pre-pandemic," said Nasser.
"In East Asia in particular, there is a strong pickup in demand. In Europe and the US, I think with more deployment of the vaccines and better recovery, we will see more demand pickup," he added.
"We can see prices so far responding to the recovery that we are seeing in the market. We are looking for a much better year in 2021," said Nasser.
Aramco's chief executive put current global crude demand at 92-93mn b/d, adding that he expected it to rise to around 99mn b/d by the end of the year. He predicted that 2022 "will see much more pickup in demand."
Nasser's bullishness is in contrast to the cautious note struck by Saudi oil minister Abdulaziz bin Salman, who has warned fellow Opec+ members against rolling back output cuts too quickly, citing the Covid-19 pandemic situation in parts of Europe and North America.
Net profit fell to SR183.76bn ($49bn) in 2020 from SR330.69bn the previous year due to "the impact of lower crude oil prices and volumes sold, and weakened refining and chemicals margins" the company said in a preliminary and partial announcement of its results.
Aramco said its average daily crude production last year came to 9.2mn b/d, but did not disclose the average price achieved by its crude sales. Brent crude averaged $41.24/bl in 2020, according to Argus data.
Aramco's free cash flow last year fell to $49bn from $78.4bn in 2019, but the company stuck to its pledge to pay shareholders a full-year dividend of $75bn. The company boosted its liquidity in November by selling dollar-denominated bonds that raised $8bn.
"Despite significant headwinds, Aramco maintains its commitment to its shareholders in funding the world's largest dividend," said Nasser.
Ahead of its partial floatation in late 2019, Aramco pledged to pay shareholders an annual dividend of $75bn through 2024. The measure was seen as an incentive to prospective retail investors. The lion's share of that dividend goes to the Saudi government, which owns around 98pc of the Aramco's equity.
In addition to its annual dividend commitment, Aramco faces the pressure of having to pay $69.1bn to Saudi Arabia's PIF sovereign wealth fund for the government's 70pc stake in petrochemicals firm Sabic. Aramco completed the purchase in 2020, and is paying the purchase price plus loan fees – which will total $75bn – in instalments through 2028.
The company's capital expenditure in 2020 fell by 17.7pc to $27bn from $32.8bn the previous year, but Aramco said it would rebound to around $35bn in 2021.
Aramco still plans to boost its maximum sustainable capacity from 12mn b/d to 13mn b/d, in line with a government directive, even though Saudi Arabia's February output of 8.3mn b/d was some 3.3mn b/d below Aramco's capacity.
Detailed engineering work on the capacity increase is underway and "progressing very well," said Nasser, but he did not give an onstream date for the project or provide an expected cost estimate for its implementation.
Nasser said Aramco's plans for "portfolio optimisation" -– a reference to plans to partially or fully sell off some of the company's downstream assets to raise cash -– is being handled by a "special administration area" created for the purpose. The process is making "good progress," he said, but he gave no details of which parts of its business Aramco plans to sell, or when the sale might occur.
Aramco's 400,000 b/d Jizan refinery in south west Saudi Arabia has come on stream, Nasser said.
The company's full financial results will be announced on Monday, and Nasser will take questions from analysts at 1230 GMT after the announcement.
