Saudi Aramco Reports -- March 21, 2021

Updates

March 22, 2021: Cyril Widdershoven has a piece on the takeaway(s) from Saudi Aramco's 2020 earnings report.

March 22, 2021: the fallout continues --

• Bloomberg; same story here without the paywall;
• Aramco oil payments to Saudi state fall 30%to $110 billion;
• Aramco's debt-to-equity ratio surged to 55% over 2020;
• Quartz: Saudi Aramco is no longer the world's most profitable company
• that distinction now falls back .... to Apple
• Apple netted $57.4 billion in FY20 vs $49 billion for Aramco
• had Apple and Aramco shared same "fiscal years" (i.e., calendar years), the disparity would have been even bigger
• Apple smashed revenue records in the holiday shopping season; in that quarter alone, made almost $23 billion profit
• on top of that Aramco is committed to paying that $75 billion annual dividend (actually, they have little choice)

Original Post

Most interesting story. Data points to follow. Isn't there some proverb about lipstick and pigs or silk purses and pig ears? More later. Too much breaking right now. 

Saudi Aramco reporting full year 2020 earnings today.

Net profit, calendar year:

• 2020, forecast: $49.5 billion (186.1 billion riyals)
• 2020: $49 billion (183.76 billion riyals); down 44% from previous year
• 2010: $88 billion (330.69 billion riyals)

Dividend:

• $75 billion (vs free cash flow of $49 billion)
  
• guidance: no change for 2021
• note: the $75 billion was a demand set by the king in exchange for agreeing to an IPO

Free cash flow:

• 2020: $49 billion
• 2019: $78.3 billion

Guidance:

• CAPEX, 2020, last year: $27 billion
• CAPEX, 2021, previously: $40 - $45 billion
• CAPEX, 2021, current guidance: $35 billion (a 30% increase)

**************************************
CAPEX -- Major Integrated Companies

Take a look at this from twitter posted earlier today, change in 2021 CAPEX from two years ago, 2019 :

Link here. I didn't want people to think I'm making this up. LOL.

Let's run through that screenshot: Saudi says they cut production, cut exports, and may continue to do the same to support crude oil prices for the next month or so. [Note: all things being equal, Saudi Arabia will increase production in the next few months to meet demand for air conditioning for summer heat -- happens every year. So when you read that Saudi Arabia is increasing oil production sometime in the next couple of months, see if you can find anywhere in the story if Saudi is doing that to increase exports. If not, that will be buried in the last paragraph, if it's reported at all.]

So, despite the tea leaves suggesting Saudi Arabia will maintain current production levels, they are increasing upstream CAPEX by one percent [Reuters says “full” CAPEX is being increased 30 percent], and earlier it was reported that Saudi Arabia had decided not to increase any offshore drilling where it's more expensive and will focus only on onshore drilling. Hmmm.

Meanwhile, while Saudi Arabia is increasing upstream CAPEX (only one percent from this source -- see the Reuters source) the other majors are significantly cutting back on CAPEX. Look at these numbers:

Four companies pivoting from oil and gas to renewable energy:

• BP: CAPEX to be cut by 16%
• Shell: CAPEX to be cut by 17%
• Total (France): CAPEX to be cut by a whopping 38%
• OMV (Austria oil and gas): CAPEX to be cut by 30%

Two companies sticking with oil and gas (at least for now, although one may be waffling)

• CVX: to cut CAPEX by a whopping 39%
• XOM: to cut CAPEX by a staggering 52%