Saudi Aramco says it will cut capital spending to cope with the slump in oil prices that followed Russia’s refusal to join Opec’s output cap.
The oil and gas giant launched the biggest-ever initial public offering (IPO) in December, raising US$25.6 billion which gave the state-run firm a valuation of US$1.7 trillion.
Last week Aramco’s shares fell below its IPO price of 32 riyals.
On Thursday, its market value fell to approximately US$1.55 trillion although it remains the world’s most valuable publicly listed company, eclipsing Apple’s US$1.16 trillion.
The state-owned oil giant has also been the greatest contributor to global carbon emissions of any firm on the planet since 1965.
Now the firm said it expected capital spending of US$25 billion to US$35 billion this year, compared to US$32.8 billion during 2019.
The international benchmark Brent crude fell by more than 20 per cent last week.
There is little hope that the demand for oil will recover.
Opec’s monthly report lowered forecasts for global average demand by 0.92 million barrels to 99.73 million barrels per day.
Saudi Aramco, which supplies around 10 per cent of global oil, reported net profits of US$88.1 billion last year, a fall of 21 per cent from US$111.1 billion in 2018.
Aramco reported a profit of US$46.9 billion in the first half of 2019: almost 10 times that of Exxon Mobil, the largest listed oil company.
It produced 13.2 million barrels of oil equivalent per day during 2019, compared to 13.6 billion in 2018.
It has exclusive rights to extract Saudi Arabia’s oil and gas reserves, which are the equivalent to 257 billion barrels of oil.
Aramco CEO Amin Nasser stated: “2019 was an exceptional year for Saudi Aramco. Through a variety of circumstances — some planned and some not — the world was offered unprecedented insight into Saudi Aramco’s agility and resilience.
“Our unique scale, low costs and resilience came together to deliver both growth and world-leading returns, while also maintaining our position as one of the world’s most reliable energy companies.”
The Saudi royals hope to reduce the kingdom’s dependence on oil and gas, which account for about 50 per cent of gross domestic product and 70 per cent of export earnings.
“The recent Covid-19 outbreak and its rapid spread illustrate the importance of agility and adaptability in an ever-changing global landscape.
“This is central to Saudi Aramco’s strategy and we will ensure that we maintain the strength of our operations and our finances.”
Militant attacks in September 2019 disrupted Saudi Aramco’s output. Picture credit: YouTube
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