ARAMCO: BANKING ON OPEC+ CUTS

Saudi Aramco’s Q3 profit decline

Saudi Aramco (TADAWUL:2222), the world’s largest oil company, reported a 23% drop in net profit primarily due to decreased oil prices and volumes sold. The decline in sales and operational profits was significantly influenced by global economic uncertainty, leading to lower hydrocarbon prices and refining margins.

 

Despite this, Aramco’s downstream capital expenditures saw a notable 10.9% increase, primarily fueled by growth project developments. Amin Nasser, Aramco’s CEO, reaffirmed their commitment to investing in the hydrocarbon chain using advanced technologies to enhance operations and promote emerging energy solutions. This strategic approach is anchored by a balanced energy transition plan, taking into account the needs of all global energy consumers, Aramco’s robust balance sheet, and Saudi Arabia’s fiscal structure.

 

Offset measures and production review

Saudi Aramco stated that lower oil prices and volumes were partially offset by a reduction in production royalties, which are linked to Brent prices. As the world’s leading oil exporter and de facto leader of the OPEC group of oil-producing nations, Saudi Arabia announced its intention to persist with its voluntary oil output cut, with a review planned for the decision next month.

 

The company declared a quarterly $19.5 billion base dividend, irrespective of performance.

Additionally, a second $9.87 billion distribution of performance-linked dividends is scheduled for the fourth quarter, based on 2022 and the first nine months of 2023. The Saudi state continues to be the predominant shareholder in Aramco, with the government directly holding 90.19%, the sovereign Public Investment Fund (PIF) owning 4%, and PIF subsidiary Sanabil having another 4%, according to LSEG data.

 

Financial outlook and expansion plans

Aramco’s IPO in late 2019, the world’s largest at the time, raised $25.6 billion, with subsequent share sales increasing the total to $29.4 billion. Presently, the company is contemplating the sale of a stake worth as much as $50 billion through a secondary share offering on the Riyadh bourse, as reported by the Wall Street Journal in September.

 

In 2021, Saudi Arabia’s Crown Prince Mohammed bin Salman highlighted plans for Saudi Aramco (TADAWUL:2222) to sell additional shares, intending to channel the proceeds toward bolstering the PIF, the primary funding source for Vision 2030.

 

Meanwhile it will be in Aramco’s best interests if its revenues get a leg up due to OPEC+ decision in favour of supply cuts.


[Disclaimer: This article is for informational purposes only and should not be construed as financial or investment advice. Any investment involves risks, and individuals should carefully consider their investment decisions. The content of this article does not constitute an offer or solicitation to buy or sell any securities. Readers should consult with their financial advisor or conduct their own research before making investment decisions.]

 

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