The oil giant’s profit falls 19% in the first quarter
- Analysts expected to see a drop in net profit this quarter compared with a year earlier, as inflation and rising interest rates squeeze global demand and raise fears of a recession.
- Still, Aramco’s net income beat expectations of $30.5 billion forecast by Reuters analysts.
- Aramco’s first-quarter dividend, which was increased in the fourth quarter to $19.5 billion, will be paid in the second quarter, the company said.
DUBAI, United Arab Emirates – Saudi state oil giant Aramco on Tuesday reported a 19% drop in first-quarter earnings, recording net income of $31.9 billion, down from $39.5 billion a year earlier, amid falling oil prices.
Analysts expected to see a drop in net profit this quarter compared with a year earlier, as inflation and rising interest rates squeeze global demand and raise fears of a recession. Still, Aramco’s net income beat expectations of $30.5 billion, which was forecast by analysts polled by Reuters.
The company’s net profit increased by 3.75% from the fourth quarter. It said the weaker earnings performance was offset by lower taxes and higher finance and other income. Shares rose 3.2% in early deals in Riyadh on Tuesday.
Aramco’s first-quarter dividend, which was increased in the fourth quarter to $19.5 billion, will be paid in the second quarter, the company said. It reported its quarterly cash flow from operating activities of $39.6 billion and free cash flow of $30.9 billion, both of which were up slightly from a year earlier.
Aramco, which is the world’s largest oil exporter, also revealed on Tuesday that it will start paying a performance-based dividend on top of the $19.5 billion, and will target between 50% and 70% of free cash flow. The dividend will be paid quarterly and at the discretion of the company’s board, depending on how the company performs, it says.
An offshore drilling platform stands in shallow water at the Manifa offshore oil field, operated by Saudi Aramco, in Manifa, Saudi Arabia, Wednesday, Oct. 3, 2018.
Simon Dawson | Bloomberg | Getty Images
Aramco CEO Amin Nasser emphasized the value of its downstream strategy, which has seen it invest heavily in petrochemical and other operations.
“We are leveraging cutting-edge technologies to increase liquids-to-chemicals capacity and meet anticipated demand for petrochemical products,” said Nasser.
Nasser emphasized the continued importance of hydrocarbons to the world’s energy needs, adding that “we believe oil and gas will remain critical components of the global energy mix for the foreseeable future.”
He said the company is “moving forward” with its capacity increase and that its “long-term outlook remains unchanged.”
Aramco posted a record 2022 net income of $161.1 billion in March, up 46.5% on the year.
Saudi Arabia’s Basic Industries Corporation (SABIC), which is one of the world’s largest petrochemical companies and is 70% owned by Aramco, saw its first-quarter net profit plunge 90% this month and warned that margins would remain under pressure amid new capacity , rising interest rates and uncertainty around global growth.
Oil and gas prices rose in early 2022, with Western sanctions against Russia following its full-scale invasion of Ukraine steadily tightening access to crude oil. But this year, so far, tells a different story for awards.
The price of the international oil benchmark Brent oil is down 9% so far this year and more than 17% year-on-year. This fall stems from a combination of financial concerns.
Earlier this month, the US Federal Reserve raised interest rates by a quarter of a percentage point, adding to investor concerns that slower economic growth could reduce energy demand.
“Pressure from anti-inflation actions by both the US Federal Reserve and the ECB [European Central Bank]has resulted in weak demand growth for most of the OECD, with recession risks ahead,” Citi’s global head of commodities research Ed Morse wrote in a note this week.
— CNBC’s Lee Ying Shan contributed to this report.
