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Saudi Aramco plans to further increase its dividend payments this year, even as the company reported a 14 percent decline in quarterly profits that fell short of analysts’ expectations.
Aramco said Monday it expects a total dividend of $124.3 billion this year, up nearly 30 percent from last year, when the company also increased payments by 30 percent to $97.8 billion US dollar increased after it reported the second-highest annual profit in its history.
The payout from the world’s largest oil producer remains the main source of revenue for the Saudi state, which owns 82 percent of the company, especially as the kingdom struggles with a budget deficit amid low oil prices. The IMF has previously said Riyadh will need an average oil price of about $100 a barrel to balance its budget despite its spending, a level not reached so far this year.
The state, which controls another 16 percent of Aramco through the PIF – the country’s sovereign wealth fund – wants to use the oil proceeds to finance mega projects, including new cities, the world’s tallest skyscraper and a huge cube-shaped building in downtown Riyadh.
In January, Saudi Arabia halted a plan to expand the kingdom’s daily oil production capacity from 12 million barrels per day to 13 million barrels per day, which was expected to cost Aramco about $40 billion between 2024 and 2028. The kingdom has also led efforts by OPEC+ producers to cut crude production to support global oil prices.
Aramco’s dividend payout hike comes as the world’s largest oil producer reported declining first-quarter profits that fell short of analyst forecasts.
The state-owned group’s net profit was $27.3 billion, down from $31.9 billion a year earlier. Analysts had expected net income of $27.6 billion, according to the company.
Aramco said that while oil prices were higher in the period compared to a year ago, lower volumes of crude oil sales and weaker refining and chemical margins led to a decline in net profit.
Still, Aramco expects oil demand to remain robust going forward despite global efforts to transition away from fossil fuels. Amin Nasser, the company’s chief executive, told an industry meeting in March that the world should “give up on the fantasy of phasing out oil and gas.”
He added that the International Energy Agency’s forecasts that oil demand would peak by 2030 were unrealistic due to increasing demand from developing countries.
Aramco shares have fallen around 10 percent on the Saudi stock exchange since the beginning of the year.