A total of 14 Saudi companies in the energy sector booked hefty losses last year, Middle East Monitor reported on Wednesday, quoting analysts who had spoken to local media.
One of the companies with losses is Saudi chemicals giant Sabic, which booked US$1.5 billion (5.63 billion Saudi riyals) in losses last year, according to Middle East Monitor, which quotes Saudi outlet Arabi21.
In the fourth quarter of 2019, Sabic booked a loss of US$192 million (720 million Saudi riyals), which was the first loss in more than 10 years, according to Sabic’s chief executive officer Yousef Abdullah Al-Benyan, quoted by Middle East Monitor.
A drop in demand globally, higher prices for feedstock, and lower prices of petrochemical products were the key reasons for the losses last year, according to Sabic’s chief executive.
Last year, Saudi Aramco said it would buy 70 percent in Sabic. In March 2019, Aramco signed the deal to buy 70 percent in Sabic from the Public Investment Fund of Saudi Arabia for the equivalent of US$69.1 billion in Saudi riyals at the time.
Saudi Aramco itself is scheduled to report full-year 2019 results on March 16, which would be the first results release since the Saudi oil giant was listed on the domestic stock market, Tadawul, in December 2019.
In its first-ever financial disclosure last year, Saudi Aramco reported in August a net income of US$46.9 billion for the first half of 2019, down by 12 percent from US$53 billion in H1 2018 on the back of lower oil prices.
As it announced in November an intention to float on the local stock exchange, Saudi Aramco reported a net profit of US$68 billion for the first nine months of the year. According to the company’s statement, Aramco’s free cash flow position was also solid, at US$59 billion, with capex calculated at US$23 billion.
By Tsvetana Paraskova for Oilprice.com
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And while the non-oil sector is growing and contributing more to the economy, oil continues to underpin the Saudi economy including the non-oil sector.
When oil prices are low, all sectors of the Saudi economy are adversely affected. It is no wonder then that a total of 14 Saudi companies in the energy sector including the giant petrochemical company Sabic were reported to have booked hefty losses last year.
Even with the accelerating diversification of the Saudi economy, oil will continue to be the driving force well into the future.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London