DHAHRAN — The Saudi Arabian Oil Company Aramco on Tuesday reported a 25 percent fall in first-quarter net profit, below analyst estimates, hurt by lower crude oil prices as the coronavirus slashed demand. Net profit fell to SR62.48 billion riyals ($16.64 billion) after Zakat and tax for the quarter to March 31 from SR83.29 billion a year earlier. Commenting on the results, Aramco President & CEO Amin H. Nasser, 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. Aramco has demonstrated resilience during economic cycles and has an unparalleled position due to a strong balance sheet and low-cost structure. "We have delivered solid earnings with robust free cash flow, despite weak energy demand and low oil prices. We remain committed to the safety of our people while delivering on our long-term value creation strategy for all of our shareholders. "During the first quarter, we took steps to further optimize our planned 2020 capital spending and identified opportunities to improve operational productivity. "We retain significant flexibility to adjust expenditures and have considerable experience in managing the business through times of adversity. This resilience will enable us to continue delivering on our commitments to our shareholders. "Looking ahead to the remainder of 2020, we expect the impact of the COVID-19 pandemic on global energy demand and oil prices to weigh on our earnings. We continue to reinforce the business during this period by reducing our capex and driving operational excellence. Longer term we remain confident that demand for energy will rebound as global economies recover." Financial highlights Net income remained robust at $16.7 billion for the first quarter, despite lower crude oil prices, as well as declining refining and chemicals margins and inventory re-measurement losses. Cash flow from operating activities was strong at $22.4 billion in the first quarter, compared to $24.5 billion in the same period of 2019. The impact of declining crude oil prices and refining and chemicals margins was partially offset by favorable movements in working capital. Free cash flow was robust at $15.0 billion in the first quarter, compared to $17.4 billion in the same period last year. Aramco balance sheet remains strong and gearing. Ratio decreased from -0.2% on Dec. 31, 2019 to -4.9% on March 31, 2020. Total dividends of $13.4 billion were paid in the first quarter, in respect of the fourth quarter of 2019. Dividends of $18.75 billion for the first quarter of 2020 are the highest of any listed company worldwide and will be paid in the second quarter. First quarter capital expenditures were $7.4 billion, compared to $7.2 billion for the same period in 2019. In light of market conditions and recent commodity price volatility, Aramco continues to expect capital spending for 2020 to be between $25 billion and $30 billion. Capital expenditures for 2021 and beyond remain under review. Operational highlights Under challenging market conditions, Aramco maintained its pre-eminence in oil and gas production. Aramco, through its wholly owned subsidiary Aramco Gulf Operations Company Ltd. (AGOC), resumed operations at Al-Khafji Joint Operations (KJO). AGOC operates in the offshore partitioned territory between the Kingdom of Saudi Arabia and the State of Kuwait, with a 50% ownership in KJO. Aramco Trading Company signed an agreement to offtake Aramco Gulf Operations Company's full share of crude oil production following the restart of KJO. During the first quarter, the Fadhili Gas Plant increased its processing capacity from 1.5 billion standard cubic feet per day (bscfd) at year-end 2019 to reach 2.0 bscfd during the first quarter of 2020. Progress remains on track and the plant is expected to reach full capacity of 2.5 bscfd this year. Despite a challenging market environment, the downstream business is keeping pace with its long-term strategy to capture value across the hydrocarbon value chain through further strategic integration and diversification of its operations.
