Saudi Aramco stock price turns south as 2020 profit tumbles 44%

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to… read more.
on Mar 23, 2021
  • Saudi Aramco posted a 44% decline in full-year 2020 earnings
  • The company still maintained its $75 billion dollar dividend payout
  • Saudi Aramco stock price is trading slightly lower on the weekly basis after it dropped almost 2% last week

Saudi Aramco (Tadawul: 2222) stock price is down about 1% on the day after a sharp rotation lower observed in oil prices this week. Furthermore, the world’s biggest oil producer has seen its profit tumble in 2020 amid the pandemic. 

Fundamental analysis: Dividend still maintained

Saudi Aramco posted a 44% decline in full-year 2020 earnings, though it maintained its $75 billion dollar dividend payout. Aramco’s chief executive Amin Nasser said the past 12 months were one of the most difficult years for the oil giant.  

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The largest oil company in the world reported a net income of $49 billion for the last year, compared to $88.19 billion in 2019, and down from analysts’ expectations of $48.1 billion. Still, the reported income represents one of the highest among public companies around the world. 

“In one of the most challenging years in recent history, Aramco demonstrated its unique value proposition through its considerable financial and operational agility,” Nasser said in a statement on Sunday. 

The oil company said lower crude oil prices and volumes sold, as well as lower refining and chemical margins, weighed on its revenues. 

Aramco said it plans to slash capital expenses over the coming year and reduced its guidance for spending to roughly $35 billion from $40 billion – $45 billion.

The company reported a 40% decline in free cash flow to $49 billion, significantly below the level of its long-awaited dividend. Aramco announced a dividend payout of $75 billion for 2020, even though it would take more debt money to maintain it. 

“Looking ahead, our long-term strategy to optimize our oil and gas portfolio is on track and, as the macro environment improves, we are seeing a pick-up in demand in Asia and also positive signs elsewhere,” he added.

Technical analysis: Triangle trading maintained

Saudi Aramco stock price is trading slightly lower on the weekly basis after it dropped almost 2% last week. Despite these losses, the price action is still up nearly 2% in March.

Saudi Aramco daily chart (TradingView)

The ascendance price action stopped again at the 36.00 mark, where the triangle resistance is located. On the downside, the 100-DMA and 200-DMA will act as support before the triangle support at 34.50 comes into play.

Summary

Saudi Aramco reported the profit for the full-year 2020 was down 44% but maintained its dividend payout of $75 billion. As a result, shares of the company moved south while lower oil prices are also not helping the stock.

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