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Saudis shield Aramco's oil revenue forecasts after going public

Aramco has slashed spending, cut jobs, and is considering selling some assets.

Saudi Arabia has stopped disclosing a breakdown of projected oil revenue now that Aramco’s listing means it would give clues about the company’s dividend policy.

“The reason we don’t disclose the oil and non-oil breakdown is because of the presence of Aramco as a listed company in the market,” Finance Minister Mohammed Al-Jadaan said in a press conference following the kingdom’s budget announcement for next year.

“The government deals with Aramco as a supplier for tax, we have revenue that comes from Aramco, tax that comes from Aramco and also dividends since the government is the largest shareholder of Aramco.”

Saudi Aramco, the world’s biggest oil company, listed shares on the Saudi stock exchange last December. It sold $8 billion of bonds last month to help fund the world’s biggest dividend. This is the first time in years the kingdom hasn’t provided a projected oil revenue breakdown.

Saudi Arabia has been hammered this year by coronavirus lockdowns and the slump in crude prices. Lower oil revenue has hit Aramco hard this year. Its free cash flow in the first nine months of the year was $33.5bn - more than $20bn short of what it declared in dividend payouts for the period.

To try and conserve cash to keep the dividend payments to the government, Aramco has slashed spending, cut jobs, and is considering selling some assets. It’s also borrowing more.

Al Rajhi Capital sees the assumed oil price in the kingdom’s 2021 budget at $48 per barrel, in line with a median estimate of analysts. “We expect government oil revenues to range from SAR400-500bn depending on Aramco’s dividends to the government,” according to the report. “We estimate non-oil revenue to be around SAR400bn on increased value-added tax, reforms, higher private sector growth, PIF and SAMA investment returns.”

According to the International Monetary Fund, Saudi Arabia would need oil to trade at $66 next year to balance its budget.

“Saudi Arabia doesn’t speak about oil prices,” said Al-Jadaan, “the finance ministry doesn’t speak about oil prices nor its forecasts. The kingdom is a main supplier and affects the oil market, and it wouldn’t be of its interest to talk about future oil prices.”

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