Saudi Oil Giant Aramco Reports Slight Drop in Net Profit

Saudi oil giant Aramco, the jewel of the Saudi economy, has reported a net profit of $29.07 billion in the second quarter, a slight drop from the same period last year. The decrease of 3.4 percent is mainly attributed to lower crude oil volumes sold and weakening refining margins.

Aramco, the world’s biggest crude exporter, is currently producing roughly nine million barrels per day (bpd), well below its capacity of 12 million bpd. The relatively low figure reflects cuts dating back to October 2022, when the OPEC+ bloc of oil producers reduced output by two million bpd to boost prices.

The company’s profits help finance flagship projects, including NEOM, the futuristic mega-city being built in the desert, a giant airport in Riyadh, and major tourism and leisure developments. Aramco’s initial public offering in 2019, the biggest flotation in history, raised $29.4 billion, and a secondary offering this year of nearly 1.7 billion shares fetched $12.35 billion.

Aramco chief executive Amin Nasser remains positive about the outlook for global oil demand, citing strong demand from China. "The market in my view is overreacting and the fundamentals do not support the drop in prices that we are witnessing today," Nasser said. "I think the market is reading too much into the short-term responses to the news coming from the US with regards to the number of jobs."

The company has also announced a steady dividend payout, with plans to declare industry-leading dividends of $124.2 billion in 2024. Aramco’s government stake is around 81.5 percent, and the company has vowed to achieve "operational net-zero" carbon emissions by 2050.

Despite the slight drop in net profit, Aramco’s performance has been strong, with strong earnings and cash flows in the first half of the year. The company’s cash cow status has allowed Saudi Arabia to record its first budget surplus in nearly a decade, and Aramco is expected to continue playing a vital role in the kingdom’s economy.

As Saudi Arabia has pledged to achieve net zero carbon emissions by 2060, Aramco’s efforts to reduce its carbon footprint will be crucial in achieving this goal. However, the company’s focus on oil and gas production is unlikely to change anytime soon, with Nasser stating that oil and gas demand "will not peak any time soon given the vital role that hydrocarbons continue to play in the global economy."