Saudi Aramco Reports 23% Drop in Q3 Profit Amid Oil Price Pressures

Saudi Aramco Reports 23% Drop in Q3 Profit Amid Oil Price Pressures

Key Insights

  • Saudi Aramco reported a 23% drop in net profit for Q3 2023, citing lower crude oil prices and sales volumes as the primary reasons.
  • Free cash flow for the same period decreased significantly, dropping to $20.3 billion, less than half of the previous year’s $45 billion.
  • Aramco maintained its dividend payout of $29.4 billion to shareholders and the Saudi government.

Saudi Aramco, the state oil giant, reported a 23% decline in net profit for the third quarter of 2023, citing lower crude oil prices and volumes sold. Despite the drop to $32.6 billion, the results exceeded analysts’ estimates, which averaged around $31.8 billion. This represents a significant decrease from the $42.4 billion profit recorded during the same period in the previous year.

The company’s free cash flow saw a substantial reduction to $20.3 billion, less than half of the $45 billion reported in the third quarter of 2022. While grappling with lower profitability, Aramco maintained its commitment to a dividend payout of $29.4 billion to investors and the Saudi government. This distribution consists of a base dividend of $19.5 billion, payable in the fourth quarter, and an additional $9.9 billion in performance-linked dividends, scheduled for the fourth quarter based on full-year 2022 and nine-month 2023 results.

Aramco’s capital expenditure increased to $11.02 billion for the quarter, compared to $9.03 billion in the same period last year. The company is pursuing expansions, including its first international liquefied natural gas (LNG) investment and entry into the South American market through a downstream retail acquisition.

Aramco’s Lower Q3 Profits Reflect Global Energy Industry Trends

The decline in profitability mirrors industry trends, as major energy companies like ExxonMobil and Chevron have reported sharp annual declines in the third quarter due to weaker oil prices.

Saudi Arabia, a key OPEC member, has implemented production cuts, both as part of the formal OPEC policy and through voluntary reductions. The country is maintaining a voluntary cut of 1 million barrels per day until year-end, with plans to revisit its production strategy in December.

Aramco’s ability to generate consistent value was affirmed by the company’s President and CEO, Amin Nasser, who also highlighted their focus on identifying new opportunities to meet customer needs.

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Earlier in the year, Fortune magazine ranked Aramco as the world’s second-largest company by revenue, after Walmart and ahead of tech giants like Apple and Amazon, following Aramco’s record-breaking annual profit announcement for 2022.

These profits were achieved when oil prices were at multi-year highs due to geopolitical events, notably Russia’s invasion of Ukraine.

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