Aramco Enhances Dividends Amidst Decline in 2023 Profits

Aramco Enhances Dividends Amidst Decline in 2023 Profits

Saudi Arabia’s state-owned oil giant, Aramco, announced on Sunday its decision to increase dividends for the past year, showcasing resilience in the face of a net profit dip from $161.1 billion in 2022 to $121.3 billion in 2023, primarily attributed to lower oil prices.

Despite this decline, the company emphasized that 2023’s profit still stands as its second-highest on record.

Aramco amplified its total dividends for the year by a noteworthy 30%, reaching a substantial $97.8 billion. This robust financial performance is particularly notable given the challenging global economic landscape and the volatility in the energy sector. The company declared a base dividend, an amount paid irrespective of financial results, at $20.3 billion for the fourth quarter, with disbursement scheduled for the current quarter.

In a testament to its commitment to rewarding performance, Aramco also approved a performance-linked dividend amounting to $10.8 billion. This marks the third such payout and underscores the company’s dedication to incentivizing excellence. Notably, both dividends experienced a significant uptick compared to the preceding quarter, showcasing Aramco’s ability to navigate and adapt to market dynamics.

Aramco provided insights into its capital investments, revealing a total of $49.7 billion for the year 2023, inclusive of $42.2 billion allocated to organic capital expenditure. This represents an increase from the $38.8 billion in overall capital investments and $37.6 billion dedicated to organic capex in the preceding year. The company expressed confidence in the future, forecasting capital investments to range between $48 billion and $58 billion in the current year, with a growth trajectory extending until the mid-decade.

However, the company faced a significant strategic shift in late January when the Saudi government directed Aramco to abandon its expansion plan aimed at boosting production capacity to 13 million barrels per day (mbpd). Instead, the company reverted to its prior target of 12 mbpd. This strategic decision is expected to result in a reduction of approximately $40 billion in capital investment between 2024 and 2028, as confirmed by Aramco.

Despite the altered production capacity goals, Aramco remains steadfast in its commitment to financial stability and resilience. The company reported a free cash flow of $101.2 billion in 2023, reflecting a decline from the robust $148.5 billion recorded in 2022. Nevertheless, Aramco’s ability to navigate challenges and maintain substantial dividends demonstrates its agility and adaptability in the ever-evolving energy market.