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Wednesday, September 2, 2020

Saudi Aramco Resets -- September 2, 2020

From SeekingAlpha:
  • Saudi Aramco is reviewing expansion plans at home and abroad as it copes with sharply lower oil prices and a heavy dividend burden, WSJ reports. 
  • Aramco will review a $6.6B plan to add petrochemical production at its Motiva refinery in Texas, as well as a big natural gas project with Sempra Energy in the same state, according to the report.
  • Aramco had agreed to buy 20 years worth of liquefied natural gas from the Sempra-led project planned for Port Arthur, Tex., and to take a 25% equity stake in the project's first production phase.
  • The Saudi state-run company also reportedly is pausing investments in refineries in China, India and Pakistan. 
  • In Saudi Arabia, Aramco is delaying plans by a year to boost crude production capacity by ~1M bbl/day to 13M bbl/day
  • The Financial Times reported last month that Aramco planned to cut its capital spending to $20B-$25B this year in order to pay a $75B dividend it pledged to investors during its IPO last year.

Think about that: cutting upwards of $10 billion in capex projects (seed corn) just so they can maintain that $75-billion dividend payout each year. The prince must be going nuts. 

And will their plans to delay an increase in production help support the price of oil? In a word, "no."

2 comments:

  1. Sounds like the same plan as XOM with the dividend. Just too much capacity from the oil patch vs. demand.

    ReplyDelete
    Replies
    1. Yes, the King of Saudi Arabia made the $75 billion dividend annually for five years as a condition for the IPO. It will really, really crimp Saudi Aramco's ability to diversify.

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