In 2023, Saudi Arabia’s state oil giant Aramco reported a significant decline in profit, with a 25% drop from $161.1 billion in 2022 to $121.3 billion in 2023. This decrease was primarily attributed to lower crude oil prices, reduced refining and chemicals margins, as well as lower volumes sold. Despite this decline, Aramco’s net income in 2023 still stands as the second-highest on record, surpassing the profitability of many of its global counterparts. The company cited a decrease in production royalties, lower income taxes, and zakat as offsetting factors in its earnings report.
Despite the decrease in profit, Aramco boosted its dividend payout in 2023. The base dividend for the fourth quarter was raised by 4% to $20.3 billion, while the performance-linked dividend was lifted by 9% to $10.8 billion, resulting in a total payout of $31 billion to the Saudi government and Aramco stakeholders. This increase in dividends comes at a time when the company faced economic headwinds and challenges in the oil market, showcasing its commitment to rewarding shareholders.
In addition to the profit decline, Aramco reported a 17% decrease in total revenue to $440.88 billion, down from $535.19 billion in the previous year. Free cash flow also fell to $101.2 billion in 2023, compared to $148.5 billion in 2022. These reductions in revenue and cash flow reflect the challenging market conditions that Aramco faced during the year, including geopolitical volatility and inflationary pressures.
Aramco’s CEO, Amin Nasser, expressed optimism about the global oil market in 2023, expecting it to remain healthy and robust with a growth projection of around 1.5 million barrels. However, the company announced its decision to halt plans to increase its oil production capacity from 12 million barrels per day to 13 million barrels per day. This move is expected to reduce capital investment by approximately $40 billion between 2024 and 2028. Instead, Aramco will focus on increasing gas production and expanding its liquids-to-chemicals business.
The Saudi government transferred an additional 8% of Aramco shares, valued at $164 billion, to Saudi Arabia’s Public Investment Fund (PIF). This transaction, one of the largest since Aramco’s listing, aims to strengthen the fund’s financial position and help achieve its end-2025 target of $1 trillion in assets under management. PIF already owned 4% of Aramco and controls Sanabil, a financial investment firm that also holds a 4% stake. With a total 16% ownership in Aramco, estimated at $328 billion, PIF is poised to benefit from Aramco’s mega dividend payout policy.
Looking ahead, Aramco aims to expand its investments in gas and gas infrastructure, with a target to increase gas production by over 60% by 2030 compared to 2021 levels. This strategic focus on diversification signals the company’s commitment to adapting to evolving market trends and reducing its reliance on oil revenue. By shifting towards alternative energy sources and expanding its portfolio of ventures, Aramco aims to position itself for long-term growth and sustainability.
Overall, Aramco’s 2023 financial results reflect both the challenges and opportunities facing the global oil industry. Despite a decline in profit and revenue, the company’s strong dividend payout and strategic investment decisions demonstrate its resilience and commitment to delivering value to shareholders in the midst of a rapidly changing market landscape. As Aramco navigates the complexities of the energy transition and seeks to capitalize on new growth opportunities, its ability to adapt and innovate will be crucial in driving future success.