Saudi Aramco 'comfortable' with oil at $30 or lower, senior executive says

The company said it could maintain a dividend payment of at least $75bn in 2020 for five years

Crude oil storage tanks stand at the oil refinery operated by Saudi Aramco in Ras Tanura, Saudi Arabia, on Monday, Oct. 1, 2018. Saudi Aramco aims to become a global refiner and chemical maker, seeking to profit from parts of the oil industry where demand is growing the fastest while also underpinning the kingdom’s economic diversification. Photographer: Simon Dawson/Bloomberg
Beta V.1.0 - Powered by automated translation

Saudi Aramco can "comfortably" meet its shareholder commitments and pay dividends even if oil prices remain at $30 per barrel, according to a senior executive.

"With Brent being at $30, we are very comfortable … that we can meet our dividends and commitments, and we are very comfortable that we can meet our shareholders' expectations at $30 and even lower," Khalid Al Dabbagh, Saudi Aramco's senior vice president of finance, strategy and development told investors on Monday.

The world's largest oil-exporter reported a 21 per cent drop in net income in its first full-year financial results as a listed company on Sunday. But executives said Aramco was committed to paying $75bn in dividends to its shareholders this year, despite a squeeze in oil prices.

"We continue to commit to the amount of dividend of at least $75bn in 2020 and for the five years starting from 2020," said Mr Al Dabbagh.

"We are very comfortable with the current market prices, we will be able to meet our commitments to the shareholders whether it is the majority shareholder or the public shareholder moving forward."

The company, which produces one in every eight barrels of oil, plans to increase its supply by 2.6 million barrels per day to 12.3m bpd in April. Aramco, whose maximum sustainable capacity stands at 12m bpd, will be drawing on inventories of 300,000 bpd to meet supply requirements for next month.

The kingdom, which had earlier championed production cuts to tackle high levels of global inventory, changed strategy after the Opec+ failed to reach a consensus to deepen existing cuts earlier this month.

Amin Nasser, the company's chief executive and president, said Aramco expected to maintain a supply of 12.3m bpd in May and would continue to produce at full capacity of 12m bpd.

"We will look at how long we can maintain the addition of 300,000 bpd [from stocks]," he said.

"We can sustain [production at 12m bpd] for one year without any additional capex or opex."

Aramco, which had earlier planned to spend $40bn for 2020, is revising its capital expenditure to between $25bn and $30bn for this year. Capital expenditure for 2021 and beyond is "currently under review", the company said. Capex for 2019 was $32.8bn, 6.5 per cent lower than the previous year.

The state-backed producer also received a directive from the Saudi Energy Ministry last week to increase its production capacity by a million bpd to 13m bpd by an unspecified timeline.

"All of that is being evaluated right now and it is being done on an accelerated basis," said Mr Nasser. Although, he said  it would "take a while" to reach the new maximum sustainable capacity.

With supply at 12.3m bpd next month, the company's associated natural gas liquids and condensates among others will increase total output to 16 million barrels of oil equivalent per day, said Mr Nasser.

Aramco's net profit for 2019 dropped to $88.2 billion (Dh324bn) from the previous year, while cash flow fell to $78.3bn from $85.8bn in 2018.

Lower crude prices, output volumes, decline in refining and chemical margins, as well as a $1.6bn impairment charge relating to the Sadara Chemical Company, affected earnings, the company said.

Meanwhile, the company does not plan to raise more debt this year, despite its "massive capacity to borrow", said Mr Al Dabbagh.

"Our balance sheet is robust. We have massive capacity to borrow but we don't necessarily aspire to get debt, we don't see the need for additional debt," he told investors.