LUCKNOW (CoinChapter.com) — Aramco, Saudi Arabia’s state-owned oil company, reported a second-quarter net profit of 112.81 billion riyals ($30.0 billion). This marks a substantial 38% decline compared to the same quarter last year.
In its filing to the Saudi stock exchange, Tadawul, the company said that the dip in profitability was attributed to lower crude oil prices and weakening refining and chemicals margins, impacitsany’s financial performance.
Company’s CEO Amin Nasser expressed optimism about global demand, stating:
“Despite the economic headwinds, we see signals that global demand remains resilient, supported by an ongoing recovery in the aviation sector.”
Aramco Surpasses Analyst Expectations, Announces Dividend Boost Despite Profit Slump
Surprisingly, Aramco’s Q2 profit exceeded analyst expectations, hovering around $29.8 billion in a company-supplied poll.
The oil giant remains committed to its shareholders despite the decline in profitability. The company reaffirms its first-quarter base dividend of $19.5 billion in Q2. Additionally, it announced a second-quarter dividend of $19.5 billion, to be delivered in the third quarter.
Additionally, Aramco plans to distribute performance-linked dividends over six quarters, initiating a $9.9 billion distribution in Q3.
Nasser said:
“Our plan to maintain a sustainable and progressive dividend for our shareholders remains intact.”
Industry Trends Affecting Aramco’s Performance
Despite a 38% decline in net income compared to last year’s second-quarter earnings, this quarter’s results still indicate a strong financial position for Saudi Aramco.
Carole Nakhle, CEO of Crystol Energy, pointed out that while the figures may not be as astonishing as the record-breaking results last year, they align with the overall industry trend. The previous year’s second-quarter earnings had reached a remarkable net income of $48.4 billion, witnessing a significant 90% surge.
This surge was largely attributed to the energy price surge triggered by Russia’s war in Ukraine.
The recent decline in profitability at Saudi Aramco aligns with the prevailing industry trends.
Last Tuesday, British oil giant BP reported a 70% year-on-year decline in second-quarter profit. Similarly, Exxon Mobil, Shell, and French oil major TotalEnergies also experienced substantial earnings falls due to weaker oil prices’ impact on the sector.
Carole Nakhle pointed out that when analyzing Aramco’s situation, considering the decline in production is essential. The decline in production has contributed to the overall industry challenges.
Aramco’s CEO, Amin Nasser, expressed optimism about resilient global demand signals. He also mentioned an ongoing recovery in the aviation sector, despite facing economic headwinds.
The recent decline in profitability is in line with industry trends. This is evidenced by other oil giants reporting steep falls in earnings due to weaker oil prices. Moreover, in June, Saudi Arabia announced a 1 million barrel per day production cut, which took effect in July.
The cut has since been extended to cover the current and upcoming months. The Saudi Press Agency reports that they can extend or deepen the decline in production beyond September.
OPEC+ Cuts Contribute to Market Stability, Oil Prices Set to Rise
The cut, along with an additional 1.66 million barrels per day decline implemented by OPEC and its allies until 2024, has placed upward pressure on oil prices, ultimately contributing to market stability.
Industry expert Carole Nakhle from Crystol Energy stated that these cuts had influenced a positive upward price trend. She mentioned that $80 per barrel is a “highly desirable” price floor for Saudi Arabia.
Top forecaster Goldman Sachs predicts Brent prices could surge to $86 a barrel by December and reach $93 per barrel by next year, driven by strong demand and OPEC+ supply deficits.
Despite facing a 38% drop in second-quarter profit due to falling hydrocarbon prices and production cuts, Saudi Aramco remains resilient and focused on maintaining a sustainable dividend for its shareholders.
As the global demand signals show hope for recovery, the oil giant navigates the industry’s challenges to stabilize markets and prepare for an expected increase in oil prices in the coming quarters.
