Aramco hikes 2023 dividend despite drop in profits

Aramco’s 2023 profit, down from a record $161.1bn in 2022, was constrained by lower oil prices, a fall in production and weaker refining margins. But it was still the second-highest ever, Aramco said today.”Our resilience and agility contributed to healthy cash flows and high levels of profitability, despite a backdrop of economic headwinds,” chief executive Amin Nasser said. “We also delivered… a 30pc year-on-year increase in total dividends paid in 2023.”

Aramco paid out $97.8bn in dividends last year, which included $19.8bn in “performance-linked” payouts in the second half of the year. The company said it has declared a quarterly base dividend of $20.3bn to be paid in the first quarter of 2024, along with a $10.8bn performance-linked payout. The company expects the full-year performance-linked dividend to amount to $43.1bn in 2024, subject to board approval.

Aramco announced in August last year plans to supplement regular shareholder payouts with performance-linked dividends based on the combined full-year results of 2022 and 2023. It said it would distribute the extra payments over six quarters, starting in the third quarter of 2023.Besides lower oil prices, Aramco also had to contend with a decline in production last year. Total hydrocarbon output dropped to 12.8mn b/d of oil equivalent (boe/d) from 13.6mn b/d in 2022, the firm said.

The fall reflects Saudi Arabia’s commitment in June to a new round of voluntary output cuts as part of the ongoing Opec+ production restraint agreement, which kept its crude output capped at just shy of 9mn b/d in the second half of the year, the lowest level since late 2020. In November, Saudi Arabia said it would keep crude output at that level through the first quarter of this year, and it recently extended that again through to the end of June.

Argus estimates Saudi crude output averaged 9.61mn b/d in 2023, down from 10.54mn b/d in 2022. These figures include Saudi Arabia’s share of production from the Neutral Zone, which has largely held within a 130,000-170,000 b/d band over the past 24 months.

Pivot to gas

Aramco’s capital expenditure (capex) came to $49.7bn in 2023, 85pc of which was organic spending. This is in line with the firm’s $48bn-$52bn guidance for the year and compares with $38.8bn of spending in 2022, of which $37.7bn was organic. The rise in capex weighed on Aramco’s free cash flow, which dropped to $101.2bn in 2023 from a record high $148bn in 2022.

The company said in 2022 that it planned to boost its capex through to the middle of the decade to drive a 1mn b/d expansion in its crude capacity to 13mn b/d by 2027 and a more than 50pc increase in its natural gas output to above 15bn ft³/d (155bn m³/yr) by 2030 from 10.14bn ft³/d in 2021.

The kingdom decided in late June to shelve the crude capacity expansion, raising speculation that Aramco might rethink its aggressive spending plans. The company said today that the decision not to progress with the crude capacity expansion would reduce its capital investment by around $40bn between 2024 and 2028. But it said it still expects to increase capex year-on-year through to the middle of the decade, with guidance for 2024 set at $48bn-58bn.

It also said today that it plans to scale up its gas production growth target to “more than 60pc by 2030” against the same 2021 baseline. That would take output to above 16.5bn ft³/d and comes hot on the heels of the energy ministry’s announcement late last month of a new discovery at the giant Jafurah unconventional gas field.