Saudi Aramco Cuts Hundreds Of Jobs, But Commits To Paying Dividend

Saudi Arabian Oil Company, better known as Saudi Aramco, has reportedly cut hundreds of jobs in response to the ongoing demand slump and persistent low oil prices.

Saudi Aramco, the world’s largest oil exporter, has apparently laid off mostly foreign employees across various divisions.

One source estimated 500 people were let go.

The company, which launched the biggest initial public offering in history late last year, has a total workforce of nearly 80,000 people.

“Saudi Aramco is adapting to the highly complex and rapidly changing business environment,” the company said in a statement. “We are not providing information regarding the details of any action at this time, but all our actions are designed to provide us more agility, resilience and competitiveness, with a focus on long-term growth.”

Saudi Aramco posted a first quarter profit of about $16.6 billion, a 25% year-over-year decline as oil demand collapsed due to the covid-19 pandemic. Although the price of Brent crude has doubled since late April, it’s still down about 34% year to date.

Saudi Aramco already cut its capital expenditure program for this year to between $25 billion and $30 billion down from an initial target of $40 billion.

In response to low oil prices, Saudi Arabia has cut production to 20-year lows and led other members of the Organization of the Petroleum Exporting Countries to reduce their output.

Saudi Aramco reportedly has idled some offshore rigs and delayed an $18 billion expansion project. In early May, offshore drilling contractor Noble Corp. (NE) said that its jack-up rig, the Noble Scott Marks, which is situated offshore Saudi Arabia, will suspend operations for up to one year.

But the oil giant still has to lay out enormous amounts of cash – it just completed the acquisition of 70% of chemicals manufacturer Saudi Basic Industries Corp. for $69.1 billion from the Saudi sovereign wealth fund. Although payments will be stretched out, Saudi Aramco still has to shell out $7 billion by Aug. 2.

Saudi Aramco also still plans to pay shareholders a $75 billion dividend this year, although the company said it might lower the amount to be disbursed to the Saudi government, which still owns 98% of its stock.

The first quarter dividend will amount to $18.75 billion.

“It will be a combination of both [debt and cash to pay the dividend],” said Saudi Aramco CEO Amin Nasser. “We would like to use our free cash definitely most of time, but other debt instruments from banks or bonds are also available for us as we have a strong balance sheet.”

“The worst is definitely behind us,” Nasser added.

Other Persian Gulf oil companies, including Qatar Petroleum, are also laying off foreign workers.

The Kuwaiti oil minister Khaled Al-Fadhel said last week that Kuwait will cease hiring foreigners for its oil sector for one year. Foreigners account for almost 3.4 million of Kuwait’s population of 4.8 million.