Saudi Aramco Q1 profit drops to $31.9bn on lower oil prices

Saudi oil major Aramco reported first-quarter net profits of $31.9bn (SAR199.6bn), a 19.25 per cent decrease compared to $39.5bn during the same period a year earlier.

“The decrease was mainly driven by lower crude oil prices, partially offset by lower income taxes and zakat and higher finance and other income,” the company said in a bourse filing.

Global crude oil prices declined in the first quarter of 2023 mainly driven by macroeconomic events contributing to market volatility.

Quarterly, the energy firm’s net profit was 3.75 per cent higher than $30.73bn for the fourth quarter of 2022. The company said its revenues plunged 10.61 per cent to SAR459.8bn in the first three months of 2023 compared to SAR517bn in Q1 2022.

“The results reflect Aramco’s continued high reliability, focus on cost and our ability to react to market conditions, as we generate strong cash flows and further strengthen the balance sheet,” said Amin H. Nasser, Aramco president & CEO.

Despite a plunge in its net income and revenues, the energy firm remains committed to paying out a dividend of $19.5bn, in line with the previous quarter. The dividend will be paid in the second quarter of the year.

#aramco Q1 2023 financial earnings reflect the company’s continued strong net income and free cash flow, reinforcing our ability to deliver on the company’s growth strategy and react to market conditions#AramcoResults

— aramco (@aramco) May 9, 2023

The company intends to introduce a mechanism for performance-linked dividends to support its aim to deliver a balanced mix of growth and yield to shareholders.  The amount will be “determined with the annual results”.

“Reinforcing our commitment to maximize long-term shareholder value, we are also announcing our intention to introduce a mechanism for performance-linked dividends, in addition to the base dividend the company currently distributes,” said Nasser.

The additional payouts would target 50 per cent to 70 per cent of annual free cash flow, net of the base dividend and other amounts including external investments.

Aramco’s investment strategy

Aramco said it plans to increase investment to capture unique growth opportunities and create long-term value for shareholders, as the company expects oil and gas to continue playing a central role in the global energy mix for the foreseeable future.

The Dhahran-based firm said capital expenditures and external investments in the Q1 2023 were SAR32.8bn and SAR9.9bn, respectively. The company is targeting capital expenditure of $45bn to $55bn for 2023.

Aramco agreed to acquire a 10 per cent stake in China’s Rongsheng Petrochemical Company Limited (Rongsheng Petrochemical) for SAR13.5bn as part of the energy firm’s broader growth strategy.

The deal is expected to significantly expand Aramco’s downstream presence in China and the company will supply up to 480 million bpd of crude oil to Rongsheng Petrochemical’s affiliate, Zhejiang Petroleum and Chemical Company under a long-term sales agreement.

The company also completed its acquisition of Valvoline’s global products business in a deal valued at SAR10.4bn. The deal is expected to complement Aramco’s line of premium-branded lubricant products, optimise its global base oils production capabilities and expand its R&D activities.

Last month, Saudi Arabia transferred 4 per cent of Aramco shares worth nearly $80bn to Sanabil Investments, a wholly owned company of the Public Investment Fund (PIF).

The private transaction did not affect the company’s total number of issued shares and does not have any impact on the company’s operations, strategy dividend distribution Policy,” Aramco said in a statement. Saudi Arabia remains the oil major’s largest shareholder, with 90 per cent shareholding and a further 8 per cent held by the PIF.

Read: Saudi Arabia transfers 4% Aramco stake to PIF