Aramco boosts 2023 dividends 30% with second-highest profit on record

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Saudi Arabia’s state-owned oil giant Aramco said on Sunday it boosted its dividends last year despite net profit falling 24.7 per cent to $121.3bn on lower oil prices and volumes.

Aramco’s strong numbers

The profit was still the company’s second-highest on record, it said, following a record $161.1bn in 2022. Aramco boosted total dividends for the year by 30 per cent to $97.8bn.

Aramco declared a base dividend, paid regardless of results, of $20.3bn for the fourth quarter. Aramco expects to pay out $43.1bn in performance-linked dividends this year, including $10.8bn to be paid out in the first quarter.

The base dividend was increased 4 per cent from the previous quarter, and the performance-linked dividend was about 9 per cent higher.

The company said capital investments were at $49.7bn in 2023, up from $38.8bn in 2022. It forecast capital investments between $48bn and $58bn this year, growing until the middle of the decade.

That range is wide because for external investments, “there’s an element of timing that we don’t fully control,” chief financial officer Ziad Al-Murshed said on a media call.

Oil supply

The Saudi government in late January ordered Aramco to scrap its expansion plan to boost production capacity to 13 million barrels a day (mbpd), returning to the previous 12 mbpd target. The Saudi government is spending billions of dollars trying to diversify and find alternative sources of wealth having relied on oil for decades.

The capacity decision “is expected to reduce capital investment by approximately $40bn between 2024 and 2028,” Aramco said.

Most of the savings are expected in the latter years, so how it will be spent will be decided as opportunities arise, Al-Murshed said. Priorities for using the extra cash include sustaining capex, the base dividend, growth capex, additional distributions and further deleveraging, he added.

Free cash flow fell to $101.2bn in 2023 from $148.5bn in 2022.

Investments

Upstream investments including gas will be almost 60 per cent of capex in 2024-2026, including external investments, chief executive Amin Nasser said. Downstream will be around 30 per cent and “new energies” around 10 per cent.

“As we go beyond that, over the next 10 years, upstream will be around 50 per cent, downstream is around 35 per cent and new energies around 15 per cent,” Nasser said.

Investing in gas will help free up more oil for export, as well as produce more liquids associated with gas extraction, he said.

Aramco’s shares were up about 1.7 per cent to SAR32.3 a share, slightly above their 2019 IPO price of SAR32.

Sources told Reuters last month that Saudi Arabia is poised to sell more shares of Aramco, which could boost financing for its ambitious economic diversification agenda.

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