Saudi Aramco to return $31 billion to shareholders and government despite profit plunge

By Christian Moess Laursen

Saudi Aramco plans to pay $31.05 billion in dividends to the Saudi government and its shareholders despite a fall in second-quarter profit.

Saudi Arabia’s national oil company reported quarterly net profit of $29.07 billion on Tuesday, down from $30.83 billion for the same period last year. The gain was a result of lower crude sales and weakening refining margins, which offset high crude prices in the quarter.

According to the company’s estimates, this result was higher than market forecasts of $27.7 billion.

“Our strong performance reflects our resilience and ability to adapt through market cycles,” said CEO Amin H. Nasser.

Oil prices improved from the first quarter on easing inflationary pressures, strong seasonal growth and falling crude inventories, the company said. Global oil demand remains strong despite headwinds in some markets, Nasser said in the interview, adding that Aramco expects demand to continue to grow in the second half of the year.

But prices have been weak since the end of the second quarter amid broader concerns about the outlook for demand in China and high levels of speculative selling of commodities. Brent crude fell below $76.50 a barrel on Monday, hitting its lowest level since January, after disappointing U.S. jobs data raised fears of a recession.

Prices have fallen nearly 12% over the past month, while Aramco shares are down about 17% this year. Still, the fossil fuel giant said Tuesday it expects oil demand to rise in the second half of the year due to improving demand in China, a recovery in global aviation and global stockpile levels.

Persistently low oil prices could put a damper on Saudi Arabia’s ambitious investment plans. The world’s top oil exporter relies heavily on Aramco’s payouts to fund its megaprojects, including a state-of-the-art city being built in the desert and a global airline, and to rapidly diversify its economy away from oil.

Aramco, one of the world’s most valuable companies, said it would pay a base dividend of $20.28 billion for the second quarter and a performance-based dividend of $10.77 billion, taking its total payout to $124.2 billion this year.

The government also raised $12.35 billion from the sale of Aramco shares in June to support its projects and investments in new energy industries under its Vision 2030 plan.

Aramco is looking to expand its global portfolio of liquefied natural gas, or LNG, and this year it signed deals with two U.S. producers of the super-chilled gas, Texas-based NextDecade and California-based Sempra.

Aramco said it expects strong growth in demand for LNG as the world continues its energy transition and gas is an important fuel and raw material across a range of industries.

Most global oil majors reported second-quarter profits that beat market watchers’ forecasts. Exxon Mobil, Shell and BP all beat expectations, with the U.S. giant posting one of its highest second-quarter profits on record production. Meanwhile, Chevron fell short of expectations as downstream profits were hit by weaker refining margins.

Aramco said quarterly hydrocarbon production stood at 12.3 million barrels of oil equivalent, down 8.9% from a year earlier.

Cash flow from operating activities – another closely watched metric – fell to $31.09 billion from $33.62 billion.

Write to Christian Moess Laursen at [email protected]

(END) Dow Jones Newswires

August 6, 2024, 08:34 ET (12:34 GMT)