Daily Management Review

Aramco Q2 Earnings Decline 38% To $30.1 Billion Yet Dividend Increases


Aramco, the state-owned oil company of Saudi Arabia, announced a nearly 38% decline in second-quarter net profit on Monday due to lower oil prices and thinner margins in the refining and chemicals industries. However, it increased its dividend by adding a new performance-linked payout.
Aramco's net profit decreased from 181.64 billion riyals a year earlier to 112.81 billion riyals ($30.07 billion) for the quarter ending June 30, topping the $29.8 billion median estimate from 15 analysts provided by the firm.
For the second quarter, the firm declared a base dividend of nearly $19.5 billion, or about in line with its distribution for the first quarter.
According to Aramco, performance-linked dividend payments will commence in the third quarter and continue for six quarters, totaling $9.87 billion.
The Saudi government continues to be by far Aramco's largest shareholder. According to Refinitiv statistics, the government directly owns 90.19% of the company, the sovereign Public Investment Fund owns 4%, and PIF subsidiary Sanabil owns the remaining 4%.
After recording its first surplus in over ten years last year, Saudi Arabia has reported a budget deficit of 8.2 billion riyals in the first half of 2023, raising the prospect of a full-year deficit.
In the second quarter of 2022, most oil corporations reported high or record-breaking profitability after Western sanctions against Russia, a key exporter, pressured an already undersupplied global market and drove up the price of crude and natural gas.
Concerns about an economic downturn and a glut of supplies have caused Brent to fall from $113 a barrel a year ago. Price support has been a goal of Moscow and Riyadh.
After Saudi Arabia and Russia promised last week to limit supplies for another month to further constrict global markets, oil futures are already at their highest levels since mid-April. On Monday, the price of Brent was around $86 per barrel.
Around 40% of the world's crude is produced by OPEC+, which de facto consists of allies led by Russia and the Saudi-led Organisation of the Petroleum Exporting Countries. Since late last year, the group has been reducing supplies to support the market.
"At Aramco, our mid to long-term view remains unchanged. With a recovery anticipated in the broader global economy, along with increased activity in the aviation sector, ongoing investments in energy projects will be necessary to safeguard energy security," CEO Amin Nasser said in a statement.
According to Nasser, the company is still anticipating capital expenditures of between $45 billion and $55 billion for this year.
He predicted that Chinese demand would increase further and noted that the country's chemicals industry was expanding quickly. He also mentioned that Aramco was still looking at possible acquisitions in China.
The price of Aramco's shares, which were up 2.2% on Monday at 08:12 GMT, has increased by nearly 12.7% this year to 32.9 riyals.