Saudi Aramco Holds Firm on $31 Billion Dividend Despite Q1 Net Income Dip.
Despite reporting lower earnings for the first quarter, Saudi Arabia’s state oil giant Aramco (2222. SE) anticipates paying $31 billion in dividends to the Saudi government and its shareholders. This projection underscores Aramco’s payouts’ critical role in supporting the Saudi economy, mainly as the kingdom works to diversify away from crude oil dependence.
Aramco’s first-quarter net income declined by 14% to $27.3 billion, attributed to reduced oil prices and volumes sold. However, the company remains committed to its dividend payments, declaring base dividends totaling $20.3 billion for the first quarter. A performance-linked dividend distribution of $10.8 billion is slated for the second quarter.
Introduced last year, the performance-based dividend is tied to the company’s earnings and constitutes a significant portion of its free cash flow. Aramco aims to declare total dividends of $124.3 billion in 2024, including $43.1 billion in performance-linked dividends.
Amidst global market dynamics, including output cuts by OPEC+ and concerns over demand, Aramco navigates challenges to sustain dividends while balancing capital expenditure. Brent crude, averaging around $83.50 in 2024, presents a backdrop against which Aramco must manage its financial obligations.
In light of fiscal pressures, Saudi Arabia may adjust its Vision 2030 economic transformation plan, potentially delaying, scaling back, or accelerating some projects. The kingdom seeks to address a projected budget deficit of $21.07 billion for 2024, with potential financing estimated at $36.80 billion.
Meanwhile, Aramco proceeds cautiously, aligning its production capacity optimization with the Saudi government’s directive to maintain a target of 12 million barrels per day. Despite halting specific expansion plans, Aramco continues with strategic projects like Marjan, Berri, and Zuluf, poised to contribute additional barrels to its production.
Looking ahead, Saudi Arabia plans to sell more shares of Aramco, signaling ongoing efforts to leverage the company’s value. Citigroup, Goldman Sachs, and HSBC reportedly facilitate this sale, further underscoring Aramco’s significance within the global energy landscape.
As Aramco navigates market volatility and strategic shifts, its resilience remains pivotal for the Saudi economy and global energy markets.
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