Aramco Rewards Shareholders with Record Dividend Despite Profit Slump

Aramco announced a 30% increase in its dividend payout for 2023

by Victor Adetimilehin

Saudi Arabia’s oil giant Aramco announced a 30% increase in its dividend payout for 2023, despite a sharp drop in its net profit due to lower oil prices and volumes. The company said it will distribute $97.8 billion to its shareholders, including the Saudi government, which owns 82.2% of the company.

The dividend hike comes as the kingdom seeks to diversify its economy and reduce its dependence on oil revenues, which accounted for 62% of its total income last year. The Public Investment Fund (PIF), the sovereign wealth fund that holds 16% of Aramco, is leading the ambitious Vision 2030 plan to invest in new sectors and create jobs.

Aramco Remains Resilient Amid Oil Market Volatility

Aramco’s net profit for 2023 was $121.3 billion, down 24.7% from a record $161.1 billion in 2022 when oil prices surged due to geopolitical tensions and supply disruptions. The average price of Brent crude, the global benchmark, fell from nearly $120 a barrel in mid-2022 to as low as $67 a barrel last year. It is now trading at about $82, amid fears that conflicts in the Middle East could push prices above $100.

Despite the lower earnings, Aramco’s profit was still the second-highest ever reported by an oil or gas company, and the company said it remains confident in the long-term outlook for oil demand. Aramco’s CEO Amin Nasser said he expects global oil consumption to reach 104 million barrels a day in 2024, up from 102.4 million in 2023.

Aramco Boosts Capital Spending to Support Growth

Aramco also increased its capital expenditure in 2023 to $49.7 billion, up from $38.8 billion in 2022, and said it expects to spend between $48 billion and $58 billion this year, with further growth until the middle of the decade. The company said it will invest in both upstream and downstream projects, as well as in new energy solutions, to create and capture more value from its operations.

However, Aramco also said it will reduce its planned expansion of its oil production capacity from 13 million barrels a day to 12 million, following a government order in late January. The company said this decision will save about $40 billion in capital spending between 2024 and 2028.

Aramco’s shares rose 1.7% to 32.3 riyals on Sunday, slightly above their initial public offering price of 32 riyals in 2019. The company said the decision to sell more shares to the public is up to the government, which raised $25.6 billion in the world’s largest IPO.

Aramco Faces Challenges and Opportunities in the Future

Aramco’s dividend boost is likely to please its shareholders, especially the Saudi government, which relies heavily on the company’s payouts to fund its budget and social programs. However, the company also faces some challenges and uncertainties in the future, such as the impact of the global energy transition, the volatility of oil prices, and the geopolitical risks in the region.

On the other hand, Aramco also has some opportunities to leverage its strengths and diversify its portfolio, such as expanding its presence in the global gas market, developing its petrochemical and refining businesses, and exploring new technologies and partnerships to reduce its carbon footprint and enhance its sustainability.

Aramco’s dividend hike shows that the company is confident in its ability to generate strong cash flows and maintain its position as the world’s most profitable oil company, even in a challenging environment. The company also demonstrates its commitment to supporting the Saudi economy and its vision for the future.

Source: Reuters

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