(Bloomberg) -- Saudi Arabia’s state-controlled oil giant stayed on track to pay shareholders $75 billion this year despite reporting a 25% drop in first-quarter profit, after a price war with Russia and the coronavirus sent prices crashing.
Saudi Aramco (SE:2222), the world’s most valuable company, will pay a dividend of $18.75 billion for the first three months of 2020, according to a statement, though it didn’t specify if it was still committed to the full-year sum.
The dividend is crucial for the kingdom’s government, which holds about 98% of the company and is facing its worst financial turmoil in decades.
Aramco’s income declined 25% year-on-year to 62.48 billion riyals ($16.6 billion) and refining swung to a loss before earnings and tax. Aramco continues to forecast between $25 billion and $30 billion of capital spending this year but expenditure for 2021 is under review, it said.
“The Covid-19 crisis is unlike anything the world has experienced in recent history and we are adapting to a highly complex and rapidly changing business environment,” Chief Executive Officer Amin Nasser said. “Aramco has demonstrated resilience during economic cycles and has an unparalleled position due to a strong balance sheet and low-cost structure.”
Saudi Arabia and Russia have called a truce in a crude-price war that erupted in March, with the former announcing a surprise cut on Monday that will see its output in June fall to the lowest in 18 years. Aramco also moved to prop up energy markets last week by raising prices for its customers.
Even so, efforts to contain the pandemic by shuttering swaths of the world economy continue to weigh on crude, which has crashed more than 50% this year.
Aramco has slashed spending as it focuses on protecting the promised shareholder payouts this year.
“We retain significant flexibility to adjust expenditures and have considerable experience in managing the business through times of adversity,” Nasser said. “This resilience will enable us to continue delivering on our commitments to our shareholders.”
The Dhahran-based company said in March that it would limit capital expenditure to $30 billion in 2020, down from previous plans to spend as much as $40 billion. As well as the dividend, major spending commitments include the first installment of a $69.1 billion acquisition of a stake in Saudi Basic Industries Corp. Aramco is buying 70% of the chemicals maker from the kingdom’s sovereign wealth fund.
The share price of Aramco, which listed in Riyadh in December, rose 0.8% to 31.15 riyals by 10:15 a.m. local time. It is down 12% for the year, compared with a 55% drop in benchmark Brent crude. The company’s market value has declined from a peak of over $2 trillion to about $1.6 trillion.
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