Aramco will pay out almost £30bn in dividends for the third quarter, boosting 90 percent owner Saudi Arabia’s coffers
Saudi Aramco (Aramco) has sustained hefty payouts to its investors, including the country’s government which owns 90 percent of the oil giant, despite a sharp slide in profits.
The world’s largest fossil fuel producer posted a 24 percent year-on-year dip in third quarter net profit, falling from $42.4bn (£34.4bn) to $32.6bn (£26.5bn).This follows lower oil production levels, with the country slashing output to prop up global prices alongside its OPEC allies, amid cooling demand and volatility across developed economies.
However, Aramco beat analyst estimates, with news agency Reuters predicting £25.8bn ($31.8bn) earnings through its median estimate from 12 forecasters.
Aramco confirmed it will pay out £23.9bn ($29.4bn) for the third quarter, boosting the Saudi government’s finances amid easing commodity markets following last year’s bumper rally fuelled by Russia’s invasion of Ukraine.
This consists of a base dividend of £15.8bn ($19.5bn) for the third quarter, alongside distribution of its performance-linked dividends with a £8.0bn ($9.9bn) payout in the fourth quarter.
The company is keeping output at around nine million barrels a day, about one million below the average over the past decade, in an effort to boost prices.
Oil prices are well below last year’s 14-year peak of $139 per barrel, but remain robust with Brent Crude and WTI Crude trading at $84 per barrel and $80 per barrel respectively.
However, the prospect of another record-breaking rally amid continued conflict between Israel and Hamas has not yet materialised, despite fears the conflict could spill into the wider region and threaten supplies.
Last year, Aramco posted a record annual net profit of £133.7bn ($161.1bn), the largest ever posted in the history of business.
Its downturn in earnings follow industry rivals posting steep declines in profits, but paying out more to shareholders, including UK-based firms Shell and BP.
Aramco aims to increase payouts further through a new performance-linked dividend which will link the distribution of profits to free cash flow.
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Moreover, Aramco’s lower production strategy has nothing whatsoever to do with stabilizing global oil prices and everything to do with production difficulties. How else would Saudi Arabia whose economy is highly reliant on the oil revenues sacrifice such revenues even when prices were higher than its fiscal breakeven prices for so long?
I believe that the US voluntary cut will become a permanent fixture of the global oil market.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert