Logo of Aramco, officially the Saudi Arabian Oil Group, Saudi oil and natural gas company, seen on the second day of the 24th World Petroleum Congress at the Big 4 Building in Stampede Park, on September 18, 2023, in Calgary, Canada.
Arthur Widak | Photo only | Getty Images
Saudi Arabia’s state-owned oil giant Aramco reported a 25% drop in profits to $121.3 billion in 2023, compared with $161.1 billion in 2022, and raised its mega dividend payout despite “economic headwinds.”
Aramco increased its base fourth-quarter dividend by 4% to $20.3 billion and its performance dividend by 9% to $10.8 billion, resulting in a $31 billion payday for the Saudi government and the shareholders of Aramco.
Despite the profit decline, the result still represents Aramco’s second-highest net profit on record and far exceeds the profitability of its major global rivals.
“The year-on-year decline was due to lower crude oil prices and volumes sold, as well as lower refining and chemical margins, partially offset by a decline in production royalties during the year and lower income taxes and zakat,” Aramco said in a statement.
Aramco said total revenue also fell 17% to $440.88 billion, compared with $535.19 billion last year. Free cash flow also fell to $101.2 billion in 2023, compared to $148.5 billion in 2022.
“It was a year in which global oil demand reached record levels despite geopolitical volatility, economic headwinds and inflationary pressures,” Aramco CEO Amin Nasser said in the earnings release on Sunday.
“We expect the global oil market to remain healthy and quite robust with growth of around 1.5 million barrels for the remainder of this year,” Nasser added. Last week, Saudi Arabia, a pioneer of OPEC+ countries, decided to extend voluntary cuts in oil production until the end of June.
Change hands
The proceeds come after the Saudi government transferred an additional 8% of Aramco shares worth $164 billion to Saudi Arabia’s Public Investment Fund (PIF). Yasir Al-Rumayyan is both chairman of Aramco and governor of the PIF.
The share transfer to PIF is one of the largest transactions Aramco has undertaken since listing and will allow PIF to benefit from Aramco’s mega dividend distribution policy.
Aramco paid dividends of $97.8 billion in 2023, 30% more than in 2022. The full-year 2024 performance dividend alone is expected to be $43.1 billion.
The share transfer “doesn’t change anything,” Aramco Chief Financial Officer Ziad Al-Murshed said in the earnings release. “We are healthy and do not need to issue new equity capital,” he said in response to a question about speculation about a second or additional public stock offering.
PIF already owned 4% of Aramco and controls Sanabil, a financial investment firm that also owns 4% of Aramco. The PIF’s 16 percent stake in Aramco, worth an estimated $328 billion, will strengthen the fund’s financial position and increase its ability to deploy capital to invest on behalf of the Saudi state as it gradually diversifies its economy away from oil.
The new Aramco stake also brings PIF closer to its goal of reaching $1 trillion in assets under management by the end of 2025.
More investments
Aramco confirmed it would halt plans to increase its oil production capacity from 12 million barrels per day to 13 million barrels per day – a move that is expected to reduce capital investment by about $40 billion between 2024 and 2028.
“The government’s recent direction to maintain our maximum sustainable capacity at 12 million barrels per day provides greater flexibility and the opportunity to focus on increasing gas production and expanding our business from liquids to chemicals,” Nasser said.
Aramco’s average hydrocarbon production was 12.8 million barrels of oil equivalent per day in 2023, including 10.7 million barrels per day of total liquids.
Aramco intends to increase its investments in other ventures, including gas and gas infrastructure. The goal is to increase gas production by more than 60% by 2030 compared to 2021 levels. Its main gas investment is the Jaffoura project – the largest gas project in the Middle East – with an estimated 200 trillion standard cubic feet of natural gas.
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2024-03-10 09:10:07
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