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Saudi Aramco posted SAR 103.4 bn (USD 27.6 bn) in net income in 3Q 2024, down 15.4% y-o-y, while revenues fell 1.8% during the period at SAR 416.6 bn, the company said in an earnings release (pdf) and a disclosure to Tadawul.
The third quarter also saw the state-owned oil giant swing into a net debt position of SAR 33.35 bn, compared to net cashflow SAR 102.75 during the same period last year. This marks the first time in two years that the company has found itself indebted as it maintains dividend payouts that exceed its earnings, Bloomberg said. The story also got ink from the Associated Press, Reuters, and CNBC.
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Third quarter earnings vs. forecasts: The latest earnings exceeded Aramco’s median estimate of USD 26.9 bn, as well as Citi’s USD 26.3 bn projection, Reuters notes. Meanwhile, results for third quarter adjusted net income attributable to shareholders fell short of analyst estimates collected by Bloomberg.
On a 9M basis: The state-owned oil giant’s bottom line dropped 11.3% y-o-y at SAR 314.7 bn in the first nine months of the year, while its top line remained largely unchanged, up 0.02% at SAR 1.24 tn.
Why the numbers moved the way they did: Aramco attributed the decline in net income to falling crude prices and weaker refining margins, with its nine-month performance also taking hits from lower volumes sold. The firm sold crude at an average of USD 79.30 a barrel during 3Q, USD 10 lower than the previous year, Bloomberg said. Meanwhile Saudi production has been capped at 9 mn bbl / d for upwards of a year due to ongoing Opec+ production cuts.
ICYMI: Opec+ pushed back a planned 180k bbl / d output hike for December for another month earlier this week, amid lingering concerns of soft oil demand from China and a glut in supply. This marks the second time the global oil group postpones productions restarts that were originally slated for October.
Business as usual in terms of dividends: The world’s largest oil exporter maintained its generous dividend payouts for the quarter, distributing a total of SAR 116.45 bn (USD 31.05 bn) composed of a SAR 76.06 bn base dividend, and a SAR 40.39 bn performance-linked dividend, Aramco said in a separate disclosure to Tadawul.
Concerns remain on dividend sustainability: Analysts had previously pegged Aramco’s dividend payments as “unsustainable” given that they exceed FCF and would ultimately drive the company to increase borrowing. The world’s largest dividend payouts are starting to weigh on the company’s finances, particularly against a backdrop of a weak outlook for oil, Bloomberg wrote in its coverage.
Aramco will have to decide early next year between maintaining its generous payouts to shareholders — and consequently increasing borrowing — or cutting back dividends and depriving the Saudi state of key financing it needs to shore up its budget, Bloomberg reported separately. The Saudi government is by far Aramco’s largest stakeholder and relies heavily on its dividends to finance economic diversification plans. Aramco had previously leveraged debt to maintain its dividend payments during the covid-19 pandemic — a strategy that is not uncommon among large oil companies during slowdowns, the business information service notes. Aramco’s 2% net debt-to-equity ratio remains far lower than that of other major oil players, Bloomberg said.
REMEMBER: Aramco closed its first bond sale in three years in July, and tacked on another in August — raising a combined USD 9 bn so far this year.
Despite FCF hitting SAR 82.47 bn in 3Q 2024, up SAR 6.19 bn y-o-y on the back of “favorable movements in working capital,” the measure shed more than SAR 40 bn on a yearly basis to settle at SAR 238.91 bn in 9M — with Aramco attributing the decline to lower earnings.
Capex is still on the rise: Aramco’s capital expenditure stood at SAR 49.59 bn in 3Q 2024, up SAR 8.24 bn y-o-y, as the company funneled considerable investments into its upstream operations to maintain a maximum sustainable production capacity of 12 mn bbl / d, while also boosting downstream assets.
