The emblem of Aramco, also known as the Saudi Arabian Oil Group, a key player in the petroleum and natural gas domain, was showcased during the second day of the 24th World Petroleum Congress held at Stampede Park’s Big 4 Building on September 18, 2023, in Calgary, Canada.
In the face of economic challenges, Saudi Arabia’s oil colossus Aramco has reported a significant drop in profits, down to $121.3 billion in 2023 from the previous year’s $161.1 billion. Nevertheless, the firm has amplified its already substantial dividend, much to the benefit of its shareholders and the Saudi government.
Aramco announced an increase in its base dividend for the fourth quarter by 4% to $20.3 billion, and a 9% hike in its performance-linked dividend reaching $10.8 billion, cumulatively handing out a $31 billion dividend windfall.
Despite the downturn in profits, Aramco’s financial outcome remains its second most lucrative, eclipsing the earnings of its major international competitors.
The year-on-year decrease can be attributed to lower crude oil prices and volumes sold, as well as reduced refining and chemicals margins, partially offset by a decrease in production royalties during the year and lower income taxes and zakat,
stated Aramco. The company also noted a decline in total revenue by 17% to $440.88 billion from $535.19 billion and a drop in free cash flow to $101.2 billion from $148.5 billion the year before.
Aramco’s Chief Executive Officer, Amin Nasser, expressed his optimism during an earnings call, citing unparalleled global oil demand amidst geopolitical unrest, economic headwinds, and inflation. Nasser anticipates a robust global oil market throughout the year with an expected growth of approximately 1.5 million barrels daily. This follows Saudi Arabia’s lead, alongside OPEC+ nations, in extending voluntary oil output reductions till the end of June.
Recently, an additional 8% of Aramco’s shares, valued at $164 billion, were transferred to the Saudi Public Investment Fund (PIF), steered by the dual-hatted Yasir Al-Rumayyan, who serves as both Aramco’s Board Chairman and the PIF’s governor. This strategic move, one of Aramco’s largest since its public listing, aims to enhance PIF’s dividends from Aramco’s lucrative payout policy.
Aramco distributed $97.8 billion in dividends during 2023, marking a 30% increase from 2022, with anticipations of the full year performance-linked dividend for 2024 to be a staggering $43.1 billion.
Aramco’s Chief Financial Officer, Ziad Al-Murshed, addressed speculation about a potential secondary or additional public offering, assuring that the company’s financial health remains robust and no new equity issuance is necessary.
Already in possession of a 4% share, the PIF, along with its financial investment arm Sanabil which holds another 4%, now commands a 16% stake in Aramco. This positions the PIF more strongly, with an estimated value of $328 billion in Aramco shares, to deploy capital for the Saudi state’s gradual shift from an oil-dependent economy. Furthermore, this bolsters the PIF’s trajectory towards its ambitious asset management target of $1 trillion by the end of 2025.
Addressing future investments, Aramco has paused plans to expand its oil production capacity from 12 million to 13 million barrels per day. This decision conserves around $40 billion in capital investments between 2024 and 2028. Aramco is pivoting to boost gas production and expand its liquids-to-chemicals operations. It has set a goal to surge gas output by over 60% by the year 2030 compared to 2021 figures. Aramco’s prime gas venture, the Jaffoura project, is the Middle East’s largest gas find with an estimated 200 trillion standard cubic feet of natural gas.