Saudi Aramco sees profit dive 50% for the first half of the year, but keeps its $75 billion dividend payout intact

• Saudi Aramco posted a 50% dive in profits for the first half of the year, as the pandemic destroyed energy demand.
• Yet the oil major kept its $75 billion dividend intact, most of which will be paid out to Riyadh government officials in the third quarter.
• The decision to retain its dividend was influenced by expectations of a rebound in energy demand as economies relax lockdown restrictions and reopen businesses.
• However, Saudi Aramco's optimism is at odds with what some forecasters believe lies in store. JPMorgan has cut its outlook for H2 demand by 1.5 million barrels a day, because of a "shallower recovery."
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Saudi Aramco reported a 50% drop in net income for the first half of the year, reflecting the severe impact on oil demand and prices from the COVID-19 pandemic.

Despite a huge drop in earnings, Aramco retained its $75 billion dividend payout as the state-run company expects a rebound in the energy market to boost future performance.

On Sunday, the company said net income dropped to about $23 billion in the first six months of the year, down by half from around $47 billion in the same period last year.

Saudi Aramco, which is also the world's largest producer of crude oil, said the rapid spread of COVID-19 had harshly impacted both oil demand and prices.

Even then, it was able to maintain a second-quarter dividend of $18.75 billion, most of which is intended for the Riyadh government, and is expected to be paid in the third quarter.

Despite its optimism over the demand outlook, Saudi Aramco, which raised a record $25.6 billion in its market debut last year, said it sees capital expenditure for 2020 falling towards the lower end of between $25 billion to $30 billion.

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Aramco's president and CEO Amin Nasser told reporters on Sunday that "our intention is to pay $75 billion, subject to board approval and market conditions."

The world's biggest oil companies have reported rough earnings and cut dividends, with BP this month slashing its payout by 50% — the first time since the Deepwater Horizon oil spill in 2010.

Although the company expects a global rebound in markets, uncertainty still clouds its projections.

Last week, JPMorgan trimmed its forecast for oil demand in the second half of this year by 1.5 million barrels per day, as it expects a "shallower recovery."

"We now see gasoline demand only growing by about 670,000 bpd, while jet fuel and other kerosene demand grows by 940,000 bpd over the balance of the year," JPMorgan analysts wrote in a note dated August 5.

Saudi Aramco's earnings came a week after it lost its status as the world's most valuable company to Apple.

The tech giant hit a record market value of $1.762 trillion, slightly higher than Saudi Aramco's $1.759 trillion.

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