By
Julia Sakovich
January 18th, 2024
Despite the revenue drop during the second quarter, Saudi Aramco declared a $19.5 billion dividend payout to shareholders.
Oil giant Saudi Aramco reported its Q2 numbers with 112.81 billion riyal ($30.07 billion) in net profit, a decline of 38% from the same period last year amid the drop in hydrocarbon prices. Interestingly, the second-quarter profits stood at $29.8 billion, slightly above the analysts’ expectations.
In its filing to the Saudi stock exchange Tadawul, Aramco said that the substantial drop in revenue came due to lower crude oil prices as well as the pressure on refining and chemicals margins. The company is following the trend of its competitors by increasing dividend payments, even though its profitability has declined significantly.
During the first quarter, Saudi Aramco declared a dividend of $19.5 billion to its shareholders. It plans a similar dividend payout during the second quarter. Saudi Aramco investors shall receive the dividend during the third quarter. Aramco also plans to distribute performance-linked dividends over six quarters, starting with a $9.9 billion distribution in the third quarter. During the company’s earnings call on Monday, August 7, Saudi Aramco CEO Amin Nasser said:
“Despite the economic headwinds, we see signals that global demand remains resilient, supported by an ongoing recovery in the aviation sector. Our plan to maintain a sustainable and progressive dividend for our shareholders remains intact”.
Saudi Aramco Financially Strong in Q2 2023
In the second quarter (Q2) of this year, Saudi Aramco’s net income dropped by 38% compared to the same period last year. In the previous year’s second quarter, they had made a huge net income of $48.4 billion, which was a 90% increase from the previous year due to a surge in energy prices caused by Russia’s war in Ukraine.
This decline in profitability is similar to what other companies in the industry are experiencing. For example, British oil giant BP reported a nearly 70% drop in second-quarter profit, and ExxonMobil, Shell, and TotalEnergies also reported significant decreases in earnings due to weaker oil prices affecting the sector.
Despite all the current headwinds, Saudi Aramco’s financial position remains strong. On Monday, August 7, Carole Nakhle of Crystol Energy told CNBC’s “Capital Connection”:
This quarter’s result “is still a strong financial position. Yes, it’s not as astonishing as the results that we saw last year – but this is aligned with the overall industry trend”.
In June, Saudi Arabia said they would produce 1 million fewer barrels of oil each day, starting in July. They have now extended this production cut for both this month and the next one. However, the Saudi Press Agency also stated that they would extend the decline beyond September.
In addition to other members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, the production cut amounts to a total decrease of 1.66 million barrels per day until the end of 2024. Nakhle added that “it has definitely put an award pressure on prices. Those announced cuts are helping OPEC+ in achieving its long-promoted mantra of achieving market stability”.
Analysts at Goldman Sachs believe that oil prices are likely to increase during the third and fourth quarters this year. These analysts expect the Brent Crude price to touch $86 per barrel by December 2024, and $93 per barrel by next year, with OPEC+ tightening the supply and demand growing simultaneously.
