Sign in
Aramco’s net income fell 14.4% y-o-y to SAR 102.3 bn (USD 27.3 bn) in 1Q 2024, it said in an earnings release (pdf). The company’s revenues during the quarter dipped 3.7% y-o-y to SAR 402.0 bn (USD 107.2 bn), which it attributed to lower crude oil sales and falling refining and chemicals margins. The lower income was, however, “partially offset by lower production royalties and an increase in crude oil prices,” the company said.
Investors will be happy: Dividends will get richer: The oil giant will pay out SAR 76.1 bn (USD 20.3 bn) in base dividends on its 1Q 2024 earnings, as well as SAR 40.5 bn (USD 10.8 bn) as a performance-linked dividend, which will be paid out in 2Q 2024, it said in a disclosure to Tadawul. The company said it expects to pay SAR 466.2 bn (USD 124.3 bn) in dividends in 2024, including SAR 161.7 bn (USD 43.1) bn that will be performance-linked.
That’s a big shift: Profitability is down, but the company is now aiming to pay out total dividends worth about 30% more than last year, when it reported its second-highest net profit ever.
REMEMBER- The government relies heavily on Aramco’s dividend to bridge the budget deficit and finance its diversification away from oil — oil accounts for about 75% of government revenues at present.
Capex rose c.24% y-o-y in 1Q 2024 to SAR 40.6 bn (USD 10.8 bn), as Aramco continued to capitalize on “unique growth opportunities,” mainly in upstream liquids and gas, downstream liquids to chemicals, and new energies such as renewables, lower-carbon fuels, and blue ammonia and hydrogen.
Cashflow fell a bit more than 26%y-o-y to SAR 85.4 bn (USD 22.8 bn) in 1Q 2024 on the back of weaker earnings and “unfavorable movements” in its working capital. Expenditures increased by SAR 7.8 bn in the same period as the company looked to maintain a maximum sustainable capacity of 12 mn barrels per day (bbl / d), while maintaining output at 9 mn bbl / d.
More production incoming: The Marjan and Berri crude oil increments — expected to add crude oil production capacities of 300k bbl / d and 250k bbl / d — are on track and forecasted to be onstream by next year. Construction on the Dammam development project also remained on track and is expected to add 25k bbl / d to crude oil production in 2024, and 50k bbl / d come 2027. This means that Aramco will be adding more than 1 mn bbl / d in crude oil production capacity by 2025.
What they said: The company said it leveraged operational efficiency and an improved market to generate strong results despite lower sales volumes amid OPEC+ output cuts. “In the first quarter [Aramco] made significant progress on expanding our gas business and growing our globally-integrated downstream value chain, while maintaining our focus on consistently delivering value for our shareholders,” said President and CEO Amin Nasser.
SOUND SMART- Downstream operations refer to Aramco’s refining and marketing of their product, while upstream operations refer to exploration and production.
No material impact PIF increasing its stake: Sovereign wealth fund PIF doubled up its stake in Aramco to 16% back in March, which Aramco says did not affect its total number of issued shares nor its operations, strategy or dividend distribution policy, maintaining that the Saudi government holds its largest stake at 82.19% in direct shareholding.
OTHER 1Q HIGHLIGHTS-
Aramco increased VC funding for its Aramco Ventures by SAR 15 bn, half of which will be earmarked for non-energy “disruptive technologies,” while the other half will go towards larger late-stage investments in sustainability and digital domains. This brings the total investment funds in its VC programs to SAR 28.1 bn, including Wa’ed Ventures, which recently participated in a SAR 68 mn series A round for Robo-advisory Abyan Capital.
ALSO-
- Aramco acquired a minority stake in MidOcean Energy in a USD 500 mn transaction and closed its acquisition of a 100% equity stake in Chile’s fuel distributor Esmax Distribución ;
- The company awarded USD 7.7 bn in engineering, procurement and construction (EPC) contracts to expand its Fadhili gas plant in the Eastern Province;
- It was also made FIFA’s Major Worldwide Partner after signing a four-year global partnership, securing rights to major tournaments including the Fifa World Cup 2025 and Fifa Women’s World Cup 2027.
MOVES-
New board members: Shareholders of Aramco approved the appointment of Economy and Planning Minister Faisal Alibrahim as a member of the board, according to a separate disclosure to Tadawul yesterday. Former BP CEO Bob Dudley will also join the board. The new board’s three-year term — which sees the reelection of PIF boss Yassir Al Rumayan and former cabinet member Ibrahim Al Assaf as chairman and deputy chairman — will begin on 1 July this year and end on 30 June, 2027.
