On Tuesday, Saudi Aramco reported a 23% decrease in its net profit for the third quarter, attributing the decline to lower oil prices and volumes sold. Nevertheless, the company’s performance marginally surpassed analyst estimates, leading to a modest increase in its shares during early trading.
The net profit for the quarter ending on September 30 declined to $32.6 billion, slightly exceeding the forecast of $31.8 billion provided by a group of 12 analysts. Saudi Aramco explained that the reduced oil prices and volumes were partially offset by a decrease in production royalties.
As a result, the company’s shares, which had already gained approximately 15% throughout the year, saw a 0.6% increase, reaching 33.65 riyals as of 09:00 GMT.
In contrast, other major energy companies, including Chevron (NYSE: CVX) and Exxon Mobil (NYSE: XOM), reported substantial year-on-year drops in their third-quarter profits due to the cooling energy prices.
Saudi Arabia, the world’s foremost oil exporter and the de facto leader of the OPEC group, recently announced its commitment to maintaining a voluntary reduction of 1 million barrels per day (bpd) in oil output until the year’s end. The government also stated its intent to review this decision in the coming month.
For the third quarter, Aramco’s reported revenue fell from $144.99 billion in the previous year to $113.09 billion, with royalty and other tax payments decreasing from $24.3 billion to $14.7 billion.
The company declared a quarterly $19.5 billion base dividend, paid regardless of its performance. Additionally, a second distribution of performance-linked dividends amounting to $9.87 billion will be paid out in the fourth quarter, based on the company’s performance in 2022 and the first nine months of 2023.
It is worth noting that the Saudi state remains Aramco’s primary shareholder, with a direct holding of 90.19%. The sovereign Public Investment Fund (PIF) holds 4%, and PIF subsidiary Sanabil possesses another 4%, as per LSEG data.
In the third quarter, Saudi Arabia reported a budget deficit of around $9.5 billion, contrasting with a budget surplus of nearly $30 billion for the entirety of 2022.
The Saudi government is in the midst of executing its economic transformation plan known as Vision 2030, which targets the expansion of the private sector and non-oil growth.
Saudi Aramco expressed its optimism about the mid- to long-term increase in energy demand and reiterated its commitment to substantial investments through its largest-ever capital program.
During the quarter, the company’s capital expenditure rose to $11 billion from $9 billion in the previous year. However, RBC noted that Aramco adjusted its 2023 capex forecast to a range of $48 billion to $52 billion, down from the previous projection of $45 billion to $55 billion.
Saudi Aramco’s initial public offering (IPO) in late 2019 was the world’s largest, raising $25.6 billion. Subsequent share offerings brought the total raised to $29.4 billion. Reports suggest that the company is contemplating a secondary share offering on the Riyadh bourse, with the potential value reaching as high as $50 billion, according to the Wall Street Journal.
In 2021, Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman, announced plans for Saudi Aramco to sell additional shares, with the proceeds earmarked to support the Public Investment Fund (PIF), the primary funding source for Vision 2030.