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Saudi Aramco rose the most in 10 months in Riyadh trading after the government allowed it to cut dividends and redirect the cash into new investments to fulfill the crown prince’s economic plans.
It would relieve some of the pressure on the world’s biggest oil company, which had to cut spending and even borrowed to pay its $75 billion dividend last year. Aramco and its subsidiary Saudi Basic Industries Corp. have committed to funding the majority of a 5 trillion riyals ($1.3 billion) private sector investment plan in a deal with the government.
The shares rose as much as 2.7%, the most since May last year, and were 1.1% higher at 35.45 riyals as of 11:42 a.m. in Riyadh. The Saudi stock index was 1.7% higher.
Oil income, including dividends from Aramco in which the state is the biggest shareholder, is the Saudi government’s major source of revenue. But the coronavirus pandemic and last year’s oil market turmoil created a double crisis for the kingdom, setting back Crown Prince Mohammed bin Salman’s goals to boost the non-oil economy and slash unemployment.
Aramco said earlier this month that capital spending in 2021 would be $35 billion, down from an earlier guidance of as much as $45 billion. The company has a raft of high-value projects on the horizon, including fulfilling a government edict that it increase it total oil production capacity to 13 million barrels a day, from 12 million a day.
The dividend cut won’t impact minority shareholders, the crown prince said. The government had promised they would get their share of the total payout for five years after Aramco sold a small stake in its 2019 initial public offering.
