Aramco Posts Another Record Year with $121B Profit

Saudi Arabian Oil Co. (Aramco) has raised its dividends after posting $121.3 billion in net income for 2023, its second highest ever annual net earnings after the $161.1 billion it had reported for 2022.

The state-owned oil giant returned $97.8 billion in dividends to shareholders last year excluding the fourth quarter, up 30 percent year-on-year, it said in a news release. Aramco declared a quarterly dividend of $20.3 billion for the October–December 2023 period, to be paid in the first quarter of 2024. The company also approved $10.8 billion as the third distribution of performance-based dividends it announced August 2023, which are spread over six quarters starting from the third quarter of 2023.

“The full year performance-linked dividend to be paid in 2024 is expected to be $43.1 billion, including the $10.8 billion in Q1 [first quarter], based on the previously announced mechanism and subject to Board approval”, Aramco said.

It attributed the fall in net profit to a decrease in crude prices, which soared 2022 in the first year of Russia’s invasion of Ukraine, as well as a reduced petroleum sale volume and lower refining and chemical margins. These were offset by a decrease in royalties, taxes and zakat, an obligatory Islamic payment for charitable purposes.

Aramco produced 12.3 million barrels of oil equivalent per day (MMboepd) in 2023, 10.7MMbpd of which were liquids.

On January 30 it said it is reducing its maximum crude output for an extended period of time to 12 MMbpd, down 1.0 MMbpd from what it was working on, on the order of the government.

“The directive to maintain Maximum Sustainable Capacity at 12 million barrels per day, mainly from deferral of projects not yet commissioned and reductions in infill drilling, is expected to reduce capital investment by approximately $40 billion between 2024 and 2028”, Aramco said in its quarterly earnings release.

It expects 2024 capex to be at $48 billion to $58 billion, “growing until around the decade”. Last year capital expenses rose 28 percent year-over-year to $49.7 billion.

The kingdom, along with other members of the Organization of Petroleum Exporting Countries Plus (OPEC+) alliance, has already put in place production cuts that have been extended several times. The latest extension means that voluntary reductions of 2.2 MMbpd—1,000 bpd for the Saudis—remain till June, “aimed at supporting the stability and balance of oil markets”, OPEC said in a statement March 3.

While lowering oil production Aramco in its earnings report bared a target to raise natural gas production to over 60 percent by 2030 relative to 2021 levels.

Aramco president and chief executive Amin H. Nasset said in a statement, “The recent directive from the government to maintain our Maximum Sustainable Capacity at 12 million barrels per day provides increased flexibility, as well as an opportunity to focus on increasing gas production and growing our liquids-to-chemicals business”.

“At the same time, we continue to make progress on several strategic crude oil increments which will contribute to our reliability, operational flexibility and ability to seize market opportunities”, Nasser added.

Aramco has continued to expand downstream. On March 2 it announced the completion of its purchase of Esmax Distribucion SPA, a fuel retailer in Chile, from Southern Cross Group, marking its entry into the South American fuel retail market. The value of the transaction has not been disclosed.

On July 21 Aramco said it had completed the purchase of a 10 percent stake in China’s Rongsheng Petrochemical Co. Ltd. for $3.1 billion.

Aramco last year also signed agreements securing talks on its bids to acquire interests in two more Chinese downstream players. Aramco plans to have a 10 percent stake in Shandong Yulong Petrochemical Co. Ltd., as announced October 11, and another 10 percent stake in Jiangsu Shenghong Petrochemical Industry Group Co. Ltd., as announced September 27.

To contact the author, email jov.onsat@rigzone.com