Saudi Arabia’s state-owned oil giant, Aramco, has reported a 23% decline in its third-quarter net profit, largely attributed to the impact of lower crude oil prices and volumes sold. The company recorded a net profit of USD 32.6 billion for the quarter ending September 30, compared to USD 42.4 billion during the same period the previous year.
Offsetting the decline
Despite the decline in oil prices and volumes, Aramco partially offset these challenges by reducing production royalties during the same period. The company’s strategy to navigate a fluctuating market environment has helped mitigate the impact on its earnings.
Revenues decline amid challenging market conditions
Revenues for Aramco in the third quarter amounted to USD 113.09 billion, a decrease compared to the USD 144.99 billion reported during the same period the previous year. The challenges faced by the energy sector, including cooling energy prices, have contributed to this revenue decline.
Sector-wide challenges
Aramco’s financial performance in the third quarter aligns with the broader trends in the energy industry. Other major energy companies, such as Chevron and Exxon Mobil, have also reported significant year-on-year declines in their third-quarter profits, reflecting the overall challenges faced by the sector.
Market context and oil output cut
While Aramco’s earnings benefited from higher crude oil prices compared to the previous quarter, it is important to note that prices are still significantly lower than the record levels seen a year ago. In light of market conditions and to maintain stability, Saudi Arabia, the de facto leader of OPEC, has decided to continue its voluntary oil output cut of 1 million barrels per day until the end of the year. A review of this decision is scheduled for the coming month.
Dividend declaration
Aramco has declared a base dividend of USD 19.5 billion for the third quarter, highlighting its commitment to shareholder returns. The company also approved a second distribution of performance-linked dividends, amounting to USD 9.87 billion in the fourth quarter. This payout is equal to the first performance-linked dividend.
Adjusting future distributions
The second performance-linked dividend is based on Aramco’s financial results in 2022 and the first nine months of 2023. Subsequent distributions will be adjusted to reflect the remaining results for 2023, indicating a flexible approach to dividends based on the company’s performance in evolving market conditions.