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In a surprising turn of events, Saudi Aramco announced a 23% decrease in its third-quarter net profit, surpassing expectations and giving its shares a boost in early trading.
Net Profit Above Expectations
The net profit for the quarter ending on September 30 reached $32.6 billion, exceeding the $31.8 billion anticipated by 12 analysts as per the company’s forecast.
Despite lower oil prices and reduced volumes, Saudi Aramco managed to mitigate the impact through a reduction in production royalties.
The company’s shares, having gained approximately 15% this year, initially saw a small increase of 0.3% to 33.55 riyals by 1000 GMT.
Notably, Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) had previously reported significant year-on-year profit declines in the third quarter. However, attributing the losses to cooling energy prices.
Saudi Arabia’s OPEC Pledge
Saudi Arabia, the leading global oil exporter and de facto leader of the OPEC group. Thus, confirmed its commitment to a voluntary 1 million barrels per day (bpd) oil output reduction until the year’s end, with a possible review next month.
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Aramco’s Q3 Figures
Aramco disclosed a total hydrocarbon production of 12.8 million barrels of oil equivalent per day for the quarter. The reported revenue dropped from $144.99 billion to $113.09 billion, and royalty and tax payments decreased from $24.3 billion to $14.7 billion.
Aramco declared a quarterly base dividend of $19.5 billion, along with a performance-linked dividend of $9.87 billion set for the fourth quarter, based on 2022 and the first nine months of 2023. The Saudi government remains the largest shareholder of Aramco, with a 90.19% stake, relying on its generous dividends.
Budget Deficit and Vision 2030
Saudi Arabia reported a third-quarter budget deficit of $9.5 billion, a significant shift from the previous year’s $30 billion surplus. The country is currently implementing Vision 2030, an economic transformation plan aimed at expanding the private sector and promoting non-oil growth.
Aramco’s Future Outlook
Aramco expressed optimism regarding long-term energy demand and continued its substantial investment efforts through its largest-ever capital program. Capital expenditure for the quarter increased to $11 billion from $9 billion. However, Aramco has revised its 2023 capex forecast to $48 billion to $52 billion.
In late 2019, Saudi Aramco conducted the world’s largest initial public offering, raising $29.4 billion, and it is now contemplating a secondary share offering worth up to $50 billion on the Riyadh bourse, as reported by the Wall Street Journal in September. This aligns with Crown Prince Mohammed bin Salman’s earlier commitment to selling more shares to support Vision 2030’s primary funding source, the Public Investment Fund (PIF).
