Falling Oil Prices Cause Saudi Aramco’s Profit to Slip 19 Percent
Saudi Aramco on Tuesday reported $31.9 billion in net income for the first quarter, a drop of about 19 percent compared with the same period a year ago, mainly because of lower oil prices.
But with oil prices still relatively robust, Saudi Aramco remains enormously profitable — its earnings were roughly comparable to the quarterly profits reported by Exxon Mobil, Chevron, Shell and BP combined — mainly because it produces enormous volumes of petroleum from giant fields in Saudi Arabia at relatively low cost.
Aramco’s main owner, the Saudi government, recently orchestrated a cutback in production by the group of countries known as OPEC Plus. But Aramco is investing in expanding output, apparently shrugging off concerns that climate change risks might in the coming years crimp the market for fossil fuels.
“We believe oil and gas will remain critical components of the global energy mix for the foreseeable future,” Amin Nasser, Aramco’s chief executive, said in a statement on Tuesday.
The company also continues to sign refining and chemical deals, mostly in Asia, intended to guarantee markets for its oil. Recently, Aramco reached agreements to participate in developing a large petroleum complex in China as well as to acquire a 10 percent stake in Rongsheng Petrochemical, another Chinese company, for $3.6 billion. Aramco said that the two agreements give the Saudi company the right to supply a total of 690,000 barrels a day of oil.
Prices for Brent crude, the international benchmark, were about $81 a barrel on average for the first quarter of 2023, compared with about $100 a barrel in the same period a year earlier.
Like its Western rivals, Aramco is under pressure to return more money to shareholders — in this case mainly the Saudi government, which is hungry for cash to finance development plans. Aramco said it would pay $19.5 billion in dividends for the quarter, a 4 percent increase over the previous period.
Aramco also said it would look into devising a mechanism for adding what it called “performance-linked” dividends to its basic payout. Biraj Borkhataria, an analyst at RBC Capital Markets, an investment bank, estimated that Aramco might pay out an additional $12 billion to $18 billion in 2023. In 2022, the company paid $75 billion in dividends.
An increase of that order would raise the company’s payouts to about 4 percent of the value of shares, from about 3.5 percent, Mr. Borkhataria said, adding that such payments would still be below those of the western oil giants in percentage terms.
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