Saudi Aramco, one of the largest government-owned oil companies in Saudi Arabia, increased its dividends in 2023, even after generating lower profit due to lower oil prices and production levels.
The drop in its profit went by 24.7%, from $161.1 billion to $121.3 billion, which is also its second-highest profit in its history, according to The Straits Times.
Saudi Aramco plays an important role in the Saudi Arabian economy, with the government owning a substantial 82.2% stake in the company. Since oil revenues make up a significant portion of the government's income (62% of total state revenues in 2023), Aramco's financial performance affects the nation's economic stability.
The Saudi government heavily relies on Aramco's dividends, which are now increased and include royalties and taxes. This highlights the interdependence between the state and its primary oil enterprise.
With that in mind, the oil giant plans to take financial actions to benefit its shareholders and ensure long-term growth despite volatile market conditions.
Firstly, Aramco plans to increase its dividends further, aiming to distribute $43.1 billion in performance-linked dividends in 2024. They will also make substantial capital investments to fuel its growth.
In 2023, the company invested $49.7 billion in various projects. Looking forward to 2024, Aramco anticipates investing between $48 billion and $58 billion. This includes an ongoing partnership with US LNG, as reported by Reuters.
Now that it complies with government instructions, the Saudi Arabian oil company will also halt its expansion plans to increase production capacity.
Instead, the company will revert to its previous target of producing 12 million barrels of oil daily. This strategic decision will reduce capital investments by around $40 billion between 2024 and 2028.
This plan contrasts Aramco CEO Amin Nasser's prediction of 104 million barrels per day in 2024 after addressing pil price challenges.
Nevertheless, Nasser is optimistic about global oil demand. In fact, investors are growing interested in Aramco, as evidenced by a 1.7% increase in its stock price to 32.3 riyals ($8.62) per share.
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