Saudi Aramco recovers from Oil price conundrum

Saudi Aramco recovers from Oil price conundrum
  • Oil giant’s shares advance 3.1% Tuesday, up 20% in two months
  • Shares of the state-led Saudi Aramco gained as much as 3.09% on Tuesday, rising with the price of crude oil.
  • Aramco is trading at levels not seen since when Oil price war erupted
  • It's the first major oil producer to have its stock price recover from the price war. 

 

Saudi Oil producers up's its game whilst europe plays catchup

While the coronavirus pandemic has threatened almost all industries, oil and gas has been particularly hurt by the collapse of demand and the market’s reaction to producers’ squabbles that sent prices plummeting.

Crude oil takes the spotlight oncemore as Saudi Aramco, the leading Oil producers in the world sets the trend in a downsized industry bereft of demand  as its share price rebound to trade at levels before the unprecedented Oil price war.

Aramco climbed 3.1% in Riyadh on Tuesday, advancing for a record sixth day alongside an extended increase in the price of crude. The stock has gained each session since the company announced it would retain dividend payouts, despite a drop in first-quarter profit.

Ironically, Aramco achieved this feat on squirmish share volumes compared with international counterparts, trading with less than 2% of the Saudi company’s stock.

An average of about $35 million worth of Aramco shares changed hands each session last week, rising to $100 million on Monday. That compares with yesterday’s Exxon Mobil Corp. share turnover of $1.4 billion.

Locals are in for a windfall as they are recipients of  stock floated during its initial public offering in December. The shares are now 20% higher than this year’s lowest close on March 16.

The world's top oil-producing company, which went public last year, has said total dividends of $13.4bn were paid in the first quarter, in respect of the fourth quarter of 2019. Dividends of $18.75bn will be paid in the second quarter.

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The Saudi company fares better than its European counterparts who are playing catch up

While Aramco stuck to its dividend plans, Royal Dutch Shell Plc slumped last month after cutting its payout for the first time since the Second World War. Total SA offered to pay part of its final 2019 dividend in shares, rather than cash.

Though Aramco has a concession to produce oil and gas in Saudi Arabia, the government owns the reserves in the ground.

98% of Aramco is still government-owned, and it has a responsibility to the government, funding a majority of the government budget.

With the price of the global oil benchmark, Brent, hovering only in the $20s, oil businesses big and small are suffering. 

"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," Aramco's CEO Amin Nasser said in a statement.

Aramco's cash flows from operating activities, stood at $22.4bn in the first quarter, compared with $24.5bn in the same period of 2019, the company said.

The national oil giant plans to acquire a stake in Saudi petrochemical maker SABIC for about $70bn.