State-owned oil giant Saudi Aramco reported a 73% dive in profits for the second quarter of 2020 due to low fuel demand brought about by the COVID-19 pandemic.

The world’s biggest crude oil exporter, however, remains optimistic the energy market will ‘partly recover’ beginning next quarter of the year.

The oil giant, like other major oil companies in the world that reported huge losses, posted a $6.6 billion net income compared to last year’s second-quarter earnings of 24.7 billion or a 73% drop in profits.

For the first half of 2020, the Dhahran-based oil company posted a $23.2 billion net income compared to $46.9 billion in profits recorded for the same period in 2019 or a 50% drop in earnings.

The Saudi Arabian Oil Company announced Sunday (August 9) its results for the second quarter and first half of 2020, highlighting the company’s financial and operational resilience, and commitment to shareholders despite challenging market conditions caused by the COVID-19 pandemic.

Saudi Aramco President and CEO Amin Nasser said:

Saudi Aramco President and CEO Amin Nasser Image Source: Saudi Aramco

“Despite COVID-19 bringing the world to a standstill, Aramco kept going. We have proven our financial resilience and operational reliability, setting a record in our business operations, while at the same time taking steps to ensure the health and safety of our people.”

 

 

What were the reasons for the dive in profits?

Nasser pointed at low oil prices and a huge drop in demand as reasons behind the profit slump.

Oil recorded negative prices in Apri 20 due to lower consumption forcing the Organization of Petroleum Exporting Countries to cut output by 10 million barrels a day just to stabilize prices.

During the height of lockdowns, one-third of the global oil demand has dropped forcing oil-producing countries to decrease production or face huge losses.

Many oil companies have posted a lower income stream such as UK-based oil and gas company BP Plc. which posted $6.7 billion in losses.

The London-based oil company last week announced it has halved its dividends per share compared to the previous quarter due to the losses.

While most oil companies like BP reduced dividends due to lower energy demand amid enforced lockdowns and low fuel demand from airlines affected by the pandemic, Aramco stood by its promise to deliver $75 billion in dividends to shareholders.

Aramco’s CEO Nasser said the reason for them sticking to the projected dividend is their solid earnings due to low production costs, unique scale, agile workforce, and unrivaled financial and operational strength.

The oil company maintains a second-quarter dividend of $18.75 billion to be paid in the third quarter.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies,” Nasser said.

Nasser further stressed that the company remains determined to emerge from the pandemic stronger and will continue to make progress in its long-term strategic journey.

 


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JM Agreda is a freelance journalist for more than 12 years writing for numerous international publications, research journals, and news websites. He mainly covers business, tech, transportation, and political news for Businessner.