Saudi Aramco left its third-quarter dividend unchanged at $18.75 billion even as it failed to generate enough cash to cover the payout and reported a 45% drop in profit.

The world’s biggest oil company generated free cash flow of $12.4 billion between July and September, down from $20.6 billion a year earlier as coronavirus lockdowns hit demand for energy and refining margins.

Aramco’s dividends are a vital source of cash for the Saudi Arabian government, whose budget deficit is expected to widen to 12% of gross domestic product in 2020 amid a severe economic contraction.

Yet the company, 98% owned by the government, probably won’t be able to continue paying out such high dividends unless oil prices, down almost 40% in 2020, rise, Moody’s Investors Service said last month. Aramco’s total payments to the kingdom, including taxes and royalties, fell 30% in the three months to the end of September to $24.6 billion.

“Aramco covered the lion’s share of its dividend this quarter, which, given the macro environment at $42 a barrel and abysmal refining margins, is quite an accomplishment,” Royal Bank of Canada analyst Biraj Borkhataria said in a research note.

Net income at the state energy firm was 44.2 billion riyals ($11.8 billion), slightly ahead of analysts’ expectations. Gearing climbed to 21.8% from 20% in June and from minus 5% in March, when Aramco had more cash than debt.

Aramco’s shares closed 0.6% higher at 34.40 riyals in Riyadh, paring this year’s drop to 2.4%. The stock has been bolstered by management’s pledge to pay a $75 billion dividend annually for five years after the completion of last December’s initial public offering.

That promise, along with a $69 billion acquisition of chemicals maker Saudi Basic Industries Corp., has seen debt levels balloon even with Aramco cutting capital expenditure and laying-off hundreds of foreign workers. Net debt rose $6 billion to $83 billion by the end of the third quarter, putting the company even further from its gearing target of between 5% and 15%.

Aramco may have to take on more debt to fund the dividend payments given its slumping cash flow. It drew down a $10 billion loan in late July. That revolving credit facility matures in May 2021, though it can be extended for another year.

“Every sign points to a belief within the company of further macro and oil recovery,” Alastair Syme, a London-based analyst at Citigroup Inc., said. Aramco’s advantage over other big oil firms is that “it has the balance sheet to see it through if the recovery takes a little longer,” he said.

While income fell year-on-year, it increased for the first time in five quarters as oil prices steadied following their battering earlier in 2020.

“We saw early signs of a recovery in the third quarter due to improved economic activity,” Chief Executive Officer Amin Nasser said. “We continue to adopt a disciplined and flexible approach to capital allocation in the face of market volatility.”

Although the results suggest the worst of the pandemic’s impact on energy demand may have passed, Aramco still faces a brittle market. Oil prices fell to a five-month low this week amid fresh travel restrictions in Europe aimed at stemming a surge in virus cases.

Saudi Arabia and other members of the OPEC+ alliance of producers -- who agreed to slash crude exports in April -- are weighing whether to delay an easing of those curbs as a way of buttressing prices.

In addition to crushing demand for fuel, the pandemic has also hit Aramco’s refining and chemicals businesses. The downstream unit swung to a $795 million loss before interest and taxes in the third quarter from an $801 million profit a year earlier.

Aramco had gross refining capacity of 6.4 million barrels a day at the end of September. It’s seeking to cement its position as one of the world’s biggest crude processors by having the capacity to turn some 8 million to 10 million barrels a day into fuels such as gasoline and diesel.