The tower of the oil giant Aramco in the financial district of Riyadh. Photo taken on April 16, 2023 (AFP/Fayez Nureldine)
Saudi oil giant Aramco reported second-quarter net profit of $30.08 billion on Monday, down sharply from the same period in 2022, due to a decline in oil prices in recent months.
This drop of 38% over one year comes after a drop of 19.25% in the first quarter.
“The decrease primarily reflects the impact of lower crude oil prices and weakening refining and chemical margins,” Aramco, 90% owned by the Saudi state, added in a statement.
“Our strong results reflect our resilience and ability to adapt to market cycles,” Aramco CEO Amin Nasser said.
“With the expected recovery of the global economy and increased activity in the aviation sector, continued investment in energy projects will be necessary to safeguard energy security,” he added.
“For our shareholders, we intend to start paying out our first performance dividend in the third quarter,” he said.
Aramco, like other behemoths in the sector, had generated record profits last year with the surge in oil prices linked to the invasion of Ukraine by Russia in February 2022, but also to the post-Covid economic recovery.
In recent months, oil prices have been weighed down in particular by the risk of recession around the world, which is weighing on the outlook for demand.
Crude prices have however risen slightly in recent days due to the slowdown in inflation in the United States but also to the strategy of reducing production implemented by exporting countries, Saudi Arabia in the lead.
– “Defending oil prices” –
The world’s largest crude exporter, the kingdom announced in April a cut in production of 500,000 barrels per day (bpd), as part of coordinated action with other oil powers to boost prices.
The tower of the oil giant Aramco in the financial district of Riyadh. Photo taken on April 16, 2023 (AFP/Fayez Nureldine)
Analysts estimate that Saudi Arabia needs oil prices around $80 a barrel to balance its budget. It was only during the month of July that the averages exceeded this threshold, a sign that the recent reductions in supply are starting to have the desired effect.
The declines “show how far the kingdom will go to defend oil prices as its commodity market slump hurts its ambitious economic diversification efforts,” said Herman Wang, an analyst at S&P Global Commodity Insights.
Aramco is undertaking investments to increase its production capacity to 13 million bpd by 2027.
Aramco’s profits are the main source of revenue for Crown Prince Mohammed bin Salman’s sweeping economic and social reform agenda, known as Vision 2030, designed precisely to allow the kingdom to diversify its largely oil-dependent economy. fossil fuels.
The jewel of the Saudi economy, Aramco posted record profits of $161.1 billion in 2022, helping the kingdom post its first annual budget surplus in nearly a decade.
These were “phenomenal results due to a very particular set of geopolitical factors,” said Jamie Ingram, editor of the Middle East Economic Survey.
“Higher revenues would of course be desired by (Saudi) officials, but Saudi Arabia still has very low debt levels and large reserves to draw on,” he added.
In December 2019, Aramco floated 1.7% of its shares on the Saudi Stock Exchange, raising $29.4 billion.
In mid-April, Saudi Arabia announced it was transferring 4% of Aramco shares, worth nearly $80 billion, to Sanabil Investments, a company controlled by the Public Investment Fund (PIF) of the kingdom, one of the largest sovereign wealth funds in the world with more than 620 billion dollars in assets.
© 2023 AFP
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