Saudi Aramco blames lower sales for drop in profit

Aramco

• Down 21% year on year
• Blames lower crude price
• Net profit $26bn

Saudi Aramco, the world’s largest listed oil company, reported a 21 percent drop in third-quarter net profit on Tuesday that it blamed on lower crude prices and sales volumes and shrinking refining margins.

The state-controlled conglomerate made a net profit attributable to shareholders of $26 billion in the three months to September 30, down from $32.9 billion a year earlier.

Revenue fell 1.8 percent to $111.1 billion over the same period.

The profit decline “was mainly due to the impact of lower crude oil prices and weakening refining margins,” an Aramco statement said. “This was partially offset by a reduction in selling, administrative and general expenses.”

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Aramco’s third-quarter average realised crude oil price was $79.30, down 11.2 percent from $89.30 in the same period in the previous year.

Aramco will pay $31.1 billion in dividends for the third quarter, up 5.8 percent from $29.4 billion in the third quarter of 2023, despite the profit drop.

Investors nonetheless seemed unimpressed, with Aramco’s shares down 0.2 percent on the New York Stock Exchange at $27.45 as of 10:30 GMT on Tuesday.

This latest payout comprises a base dividend of $20.3 billion and a performance-linked dividend of $10.8 billion. In total, the dividend exceeds Aramco’s quarterly free cash flow of $22 billion, which it defines as the money generated from its operations minus capital expenditure.

Saudi Arabia’s government owns 81.5 percent of Aramco, the state-owned Public Investment Fund holds 16 percent and the remainder is publicly traded. Aramco completed a secondary public offering in June, selling 0.6 percent of its shares for SAR42.1 billion ($11.2 billion), according to AGBI calculations. The secondary sales price was SAR27.25 per share.

Upstream expenditure rises

Third-quarter earnings before interest and taxes (Ebit) from Aramco’s upstream, or hydrocarbon extraction, business fell 12.9 percent year on year to $52.8 billion, a drop that it said was due to lower crude prices and sales volumes.

The unit’s quarterly capital expenditure rose 18 percent to $10.6 billion as it sought to maintain Aramco’s crude oil “maximum sustainable capacity” at 12 million barrels per day (bpd).

Saudi Arabia produced an average of 8.98 million bpd in the third quarter, according to Opec.

Downstream losses

Aramco’s downstream unit, which refers to its refining, marketing and distribution businesses, made a third-quarter Ebit loss of $1.78 billion, a reversal from an Ebit gain of $5.26 billion a year earlier.

The company said this loss was largely due to lower refining margins, the declining value of its product inventory and “certain other non-cash charges”.