Saudi Aramco posts blowout annual profit, raises dividend

SAUDI Aramco followed oil-producing rivals by reporting blowout annual earnings and increasing its dividend, though its profit dipped in the fourth quarter as high interest rates slowed major economies.

The world’s biggest energy company made net income of US$161 billion in 2022, the most since it listed in Riyadh in 2019. Its performance was bolstered by record production and oil prices soaring to around US$130 a barrel after Russia’s invasion of Ukraine.

Aramco unexpectedly raised its dividend – a crucial source of funding for the Saudi Arabian government – to US$19.5 billion for the final quarter, a rise of 4 per cent from the previous three-month period.

US and European peers such as Chevron and Shell are returning billions of dollars to shareholders through larger dividends and buybacks. Aramco, until now, has instead focused on boosting output of oil and natural gas.

Crude prices have dropped since the middle of 2022 and have fallen another 4 per cent this year, with Brent now trading belowUS$83 a barrel. That was caused in large part by the US Federal Reserve staying hawkish on inflation and investors no longer anticipating that rates will be on a clear downward path by the second half of 2023.

The company’s profit weakened to US$30.7 billion between October and December, according to data compiled by Bloomberg. That was down from US$42.4 billion in the third quarter.

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Yet many traders still think oil will climb later this year, perhaps back to US$100 a barrel, as demand strengthens in China with the reopening of its economy. Saudi Basic Industries, a chemicals company controlled by Aramco, had a profit slump in the fourth quarter as the global economic downturn weighed on consumption of everything from plastics to building materials.

Aramco is spending billions of dollars to raise its daily oil capacity to 13 million barrels by 2027 from 12 million, and gas output by more than 50 per cent this decade.

Crude production averaged 10.5 million barrels a day in 2022, the highest level ever for the kingdom. That came as Opec+ – an alliance led by Saudi Arabia and Russia – opted to pump more following deep supply cuts in 2020 as the Covid-19 pandemic worsened.

“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real – including contributing to higher energy prices,” chief executive officer Amin Nasser said in a statement.

The full year dividend of US$75.8 billion – the world’s largest for a public company – was easily covered by free cash flow, which soared to almost US$149 billion. Aramco will also issue one bonus share for every 10 shares owned. BLOOMBERG