Saudi Arabia’s state oil giant, Aramco, has reported a significant 25% decline in profit for the year 2023, dropping to $121.3 billion, down from $161.1 billion in 2022. Despite this decrease, Aramco remains the most profitable company in the world, outperforming its global peers by a wide margin. The decline in profit is attributed to lower crude oil prices and volumes sold, as well as reduced refining and chemicals margins.
Despite the decline in profit, Aramco decided to boost its dividend payouts to shareholders, including the Saudi government and other stakeholders. The base dividend for the fourth quarter was raised by 4% to $20.3 billion, while the performance-linked dividend increased by 9% to $10.8 billion, resulting in a total dividend payout of $31 billion. Aramco’s total revenue also fell by 17% to $440.88 billion in 2023, down from $535.19 billion in the previous year. Additionally, free cash flow decreased to $101.2 billion, compared to $148.5 billion in 2022.
In an earnings call, Aramco CEO Amin Nasser expressed optimism about the global oil market, predicting a healthy outlook for the remainder of the year with an expected growth of about 1.5 million barrels. Saudi Arabia, leading OPEC+ countries, decided to extend voluntary oil output cuts until the end of June. However, Aramco confirmed it would not pursue plans to increase its oil production capacity from 12 to 13 million barrels per day, aiming instead to focus on gas production and expanding its liquids-to-chemicals business.
The Saudi government transferred an additional 8% of Aramco shares, valued at $164 billion, to the Public Investment Fund (PIF). This transaction will strengthen PIF’s financial position, increasing its Aramco ownership to 16%, worth an estimated $328 billion. PIF, already owning 4% of Aramco, is gradually diversifying its investments away from oil, aligning with Saudi Arabia’s economic diversification goals. PIF’s 16% ownership in Aramco pushes it closer to its end-2025 target of managing $1 trillion in assets.
Aramco is poised to increase its investments in gas and gas infrastructure, targeting a 60% increase in gas production by 2030 compared to 2021 levels. The company’s decision to halt plans for increasing oil production capacity will reduce capital investment by approximately $40 billion between 2024 and 2028. This move aligns with Saudi Arabia’s directives to focus on expanding gas production and developing its liquids-to-chemicals business. Aramco’s strategic shifts reflect a broader strategy to adapt to changing market dynamics and drive sustainable growth in the future.
While Aramco’s profit decline in 2023 reflects challenging market conditions, the company’s strategic decisions and investment focus position it for long-term success in a rapidly evolving energy landscape.
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