The world’s biggest oil firm, Saudi Aramco, has announced a near-40% fall in profits after a decline in crude oil prices and weakening margins in refining and chemicals.
The company, which is 90% owned by the Saudi state, said in a statement to the market that profits were $30.1bn for the months of April to June, down 38% from $48.4bn in the second quarter of last year.
The decline in profits reflects a drop in oil prices this year after they surged following Russia’s invasion of Ukraine in February. That jump helped Saudi Aramco to a $161bn profit last year, the largest recorded by an oil and gas firm.
Aramco said on Monday it would pay a base dividend of just over $19.51bn for the second quarter, and also announced it was handing out an additional performance-linked payout of $9.87bn for the third quarter.
The fall in profits comes amid a reduction in production from Saudi Arabia, the world’s largest exporter of crude oil, after Riyadh announced cuts of 500,000 barrels a day (bpd) in April. That move was part of a coordinated action alongside other major oil exporting economies to cut supply by more than 1m bpd in order to keep prices high.
In June, the Saudi energy ministry announced a further voluntary cut of 1m bpd, which took effect in July and has been extended through September. The kingdom’s daily production is approximately 9m bpd, far below its reported daily capacity of 12m bpd.
Saudi Arabia is counting on oil prices staying high to fund a sweeping reform agenda known as Vision 2030 that aims to shift its economy away from fossil fuels.
Analysts say the kingdom needs oil to be at least $80 per barrel to balance its budget. Prices are now above that threshold, a sign that the recent supply cuts are starting to have the desired effect.
The cuts “show the lengths to which the kingdom will go to defend oil prices, as a slumping market for its lifeblood commodity is damaging to its ambitious economic diversification efforts”, said Herman Wang, the associate director for oil news at S&P Global Commodity Insights.
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Aramco’s record profits last year allowed the kingdom to notch up its first annual budget surplus in nearly a decade.
“Our strong results reflect our resilience and ability to adapt through market cycles,” the company’s chief executive, Amin Nasser, said.
“We continue to demonstrate our longstanding ability to meet the needs of customers around the world with high levels of reliability. For our shareholders, we intend to start distributing our first performance-linked dividend in the third quarter.”
