Aramco experiences a 25% decline in full-year earnings.

• In 2023, Aramco, Saudi Arabia's state oil company, experienced a 25% decrease in profit, from $161.1 billion in 2022 to $121.3 billion.
• The result still represents Aramco's second-highest ever net income.
• The Saudi government transferred an additional 8% of Aramco shares, worth $164 billion, to its Public Investment Fund, resulting in increased earnings.

In 2023, Aramco, Saudi Arabia's state oil company, experienced a 25% decrease in profit to $121.3 billion from $161.1 billion in 2022, while still increasing its mega dividend payout despite economic challenges.

The Saudi government and Aramco stakeholders received a $31 billion dollar payday as a result of Aramco raising its base dividend for the fourth quarter by 4% to $20.3 billion dollars and lifting its performance-linked dividend by 9% to $10.8 billion.

Although Aramco's earnings decreased, its net income remains its second-highest on record, surpassing the profitability of its global competitors.

Lower crude oil prices and volumes sold, reduced refining and chemicals margins, and a decrease in production royalties during the year, partially offset by lower income taxes and zakat, are the reasons for the year-on-year decrease, according to Aramco.

In 2023, Aramco's total revenue decreased by 17% to $440.88 billion from $535.19 billion in 2022, while free cash flow also decreased to $101.2 billion from $148.5 billion in the previous year.

Despite geopolitical volatility, economic headwinds, and inflationary pressures, global oil demand reached record levels in the past year, according to Aramco CEO Amin Nasser, who made this statement during the earnings call on Sunday.

Saudi Arabia led OPEC+ countries in a decision to extend voluntary oil output cuts until the end of June, and we anticipate the global oil market to remain healthy with growth of approximately 1.5 million barrels over the remainder of this year, according to Nasser.

Changing Hands

The Saudi government transferred an additional 8% of Aramco shares, worth $164 billion, to the Public Investment Fund (PIF), and Yasir Al-Rumayyan is both the chairman of Aramco's Board of Directors and the governor of the PIF.

Aramco's mega dividend payout policy will benefit from the largest share transfer to PIF since listing.

In 2023, Aramco paid $97.8 billion in dividends, a 30% increase from the previous year. For 2024, the full year performance-linked dividend is expected to be $43.1 billion alone.

Aramco's CFO Ziad Al-Murshed stated during the earnings call that the share transfer does not affect anything and the company is in good health with no need for a new equity issuance in response to speculation about a secondary or additional public share offering.

The Public Investment Fund (PIF) already owns 4% of Aramco and controls Sanabil, a financial investment firm that also owns 4% of Aramco. The PIF's 16% stake in Aramco, worth an estimated $328 billion, will enhance the fund's financial standing and enable it to invest more capital on behalf of the Saudi state, which is gradually shifting its economy away from oil.

The new Aramco stake propels PIF nearer to its 2025 goal of $1 trillion in assets under management.

More Investment

Aramco announced that it will abandon plans to increase its oil production capacity from 12 million to 13 million barrels per day, which was projected to save around $40 billion in capital investment between 2024 and 2028.

Nasser stated that the government's recent directive to maintain Maximum Sustainable Capacity at 12 million barrels per day offers flexibility and an opportunity to concentrate on increasing gas production and expanding the liquids-to-chemicals business.

In 2023, Aramco's average hydrocarbon production was 12.8 million barrels of oil equivalent per day, with 10.7 million barrels per day of total liquids included.

Aramco plans to boost its investments in various enterprises, including gas and gas infrastructure. The company aims to increase its gas production by over 60% by 2030, compared to 2021 levels. Its primary gas investment is the Jaffoura project, which is the largest gas field in the Middle East, with an estimated 200 trillion standard cubic feet of natural gas.