Aramco increases dividend payouts despite falling profit

Aramco

• $31bn dividend in Q1 2024
• Net profit down 14%
• Free cash flow down by $8bn

Aramco will distribute higher dividends to its investors and the government, despite a drop in profit in the first quarter of this year.

The state-owned energy major will pay a $31 billion dividend in the first quarter as it continues to fuel Saudi Arabia’s budget and spending on giga-projects designed to diversify the kingdom’s economy away from hydrocarbons.

It expects total dividends to reach more than $124 billion in 2024.

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Aramco said on Tuesday that its first-quarter net profit fell 14 percent to over $27 billion due to lower oil prices and volumes.

Saudi Arabia recorded a budget deficit in the first quarter of 2024 of SAR12.4 billion ($3.3 billion), four times higher than a year ago.

The government holds an 82 percent stake in Aramco, and dividends constitute a significant part of its revenue. The Public Investment Fund, the kingdom’s sovereign wealth fund, owns 16 percent, while 2 percent is publicly traded.

Aramco’s free cash flow fell to $22.8 billion, down from $30.9 billion in the first quarter of 2023.

The world’s biggest crude exporter currently produces around nine million barrels per day as it implements Opec+ output cuts to keep oil prices higher.

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Brent traded at $83.34 per barrel on Tuesday, while Aramco stocks were slightly up by 0.33 percent to SAR30.05 per share.

The International Monetary Fund estimates Saudi Arabia’s fiscal breakeven price at $96.2 per barrel of oil.

Aramco’s net profit fell 25 percent year on year in 2023.

The company has postponed plans to increase its output capacity from 12 million barrels to 13 million barrels per day. It aims to increase its gas output by 60 percent.

Aramco’s chief executive, Amin Nasser, said: “We made significant progress on expanding our gas business and growing our globally integrated downstream value chain.” 

Aramco, with a $2 trillion market value, has introduced a new mechanism to boost dividends, attract more investors and improve liquidity. 

The massive payout comes as the company considers a potential secondary share sale that could raise nearly $20 billion.