Saudi Aramco’s third-quarter profits declined 15.4% year-over-year, but the state-owned oil giant will maintain its substantial dividend payout amid growing pressure on Saudi Arabia’s public finances. The company reported net income of USD 27.6 billion for the quarter ending September 30, exceeding analyst expectations despite lower crude prices and reduced refining margins.
The oil giant announced a total dividend of USD 31.1 billion for the quarter, including USD 10.8 billion in performance-linked payments. This maintains the company’s position as one of the world’s largest dividend payers, with projected total dividends of USD 124.3 billion for 2024, of which USD 43.1 billion is expected to be performance-linked.
The dividend commitment is particularly significant given Saudi Arabia’s increasing reliance on Aramco’s payments to fund its ambitious economic diversification program, Vision 2030. The Saudi government directly holds 81.5% of Aramco’s shares, while the Public Investment Fund (PIF), the kingdom’s sovereign wealth fund, controls an additional 16%.
The PIF, which manages approximately $925 billion in assets, is currently steering Vision 2030’s extensive investments across various sectors, including sports, electric vehicles, and planned futuristic cities. However, recent reports indicate the fund is considering a reorganization, including project reprioritization and expense reviews, following Finance Minister Mohammed Al Jadaan’s earlier statements about potential adjustments to Vision 2030.
Saudi Arabia’s current oil production stands at approximately 9 million barrels per day, representing about three-quarters of its capacity, following production cuts agreed upon with OPEC+ members. With Brent crude trading at $75.12 per barrel, significantly below the IMF-estimated $98.40 per barrel needed for Saudi Arabia to balance its budget, the kingdom faces increasing fiscal pressure.
The impact of lower oil output and prices is reflected in Saudi Arabia’s public finances. The kingdom now expects a fiscal deficit of 118 billion riyals ($32 billion) in 2023, equivalent to 2.9% of GDP, exceeding the previous projection of 79 billion riyals. To address these financing needs, the government has increased its debt issuance and sold additional Aramco shares, raising $12.35 billion earlier this year.
Aramco’s share price has declined approximately 17% this year, broadly in line with some Western oil majors but underperforming others. The company’s stock performance reflects broader market concerns about global oil demand and price volatility.
The kingdom’s total public debt reached 1.15 trillion riyals ($306.17 billion) at the end of June, marking a 9.4% increase from the previous year. Projections indicate public debt will rise to 1.172 trillion riyals by year-end, exceeding earlier estimates of 1.103 trillion riyals.
The financial landscape is further complicated by significant debt raising activities from Aramco itself, the PIF, and other state-linked enterprises, all of which have accessed international debt markets this year to support their operations and investments.
Despite the challenging environment, Aramco’s quarterly performance exceeded the company-provided median estimate of $26.9 billion and Citi’s forecast of $26.3 billion, demonstrating the company’s resilience in managing market headwinds while maintaining its crucial role in supporting Saudi Arabia’s economic transformation.