Saudi Arabia’s state-controlled oil giant retained its massive dividend despite a 25 per cent plunge in profit, and signaled it would keep spending in check as it braces for deeper damage from the oil crisis. Saudi Aramco, the world’s most valuable listed company, will pay a dividend of $18.75 billion for the first three months of 2020. That would leave it on track to meet its full-year goal of $75 billion, though it didn’t specify if it was still committed to that number.
The payout is crucial for the kingdom, which holds about 98 per cent of Aramco and is facing its worst financial turmoil in decades as revenue falls. On Monday, the government tripled value-added tax and cut bureaucrats’ allowances as it looks to rein in a fiscal deficit that could reach 13 per cent of gross domestic product this year.
At the time of Aramco’s record initial public offering in December, the dividend was a huge part of its appeal. A stress test carried out by JPMorgan Chase showed that if oil fell to $40 a barrel and production was 9 million barrels a day, Aramco would only remain within its self-imposed borrowing target if it cut the dividend by 30 per cent and slashed spending dramatically.
Arab Light crude, one of the nation’s main grades, plunged to as little as $13.34 a barrel last month as an Opec+ agreement to curb supply fell apart and Saudi Arabia ramped up production.