Saudi Arabia’s state-controlled oil behemoth Aramco reported on Monday that its second-quarter profits plunged nearly 40% compared to the same period last year, attributing the steep drop to lower crude oil prices globally.
Aramco posted total sales of just over $106 billion for the April-June quarter, a 29% decline from the $150 billion in sales during the second quarter of 2022. In its earnings filing to the Saudi stock exchange, Aramco stated that the reduction in sales “mainly reflected the impact of lower crude oil prices and weakening margins for refining and petrochemicals.”
The company’s net income in the second quarter totaled $30 billion, a 37.8% decrease from the $48 billion in net profit during the same period last year.
Despite the substantial profit slide, Aramco increased its dividend payout to shareholders to $29.4 billion, up from the $18.8 billion dividend issued in the second quarter of 2022. The company said the higher dividend was based in part on Aramco’s record earnings in 2021.
“Our strong results reflect our resilience and ability to adapt through market cycles,” said Aramco CEO Amin Nasser in a statement released with the earnings report. Aramco’s stock rose 1.08% on Monday following the results.
Last week, Fortune magazine ranked Aramco as the world’s second-largest company by revenue in 2022, behind only Walmart and ahead of Amazon and Apple. The ranking came after Aramco posted over $160 billion in earnings last year, the highest ever reported by a publicly listed company.
Aramco’s massive earnings in 2022 were fueled by a spike in oil prices caused by Russia’s invasion of Ukraine. Globally traded crude peaked at over $120 per barrel in June before settling around $75 to $85 for much of the past year.
Saudi Arabia has repeatedly cut oil production in recent months and pushed fellow OPEC members to do the same in an attempt to lift prices amid weaker demand from China and rising interest rates aimed at taming inflation.
The kingdom relies on high oil prices to fund its Vision 2030 plan to transform its economy, including mega infrastructure projects like a $500 billion futuristic city. Saudi Arabia is also pouring billions into tourism, entertainment, and sports.
Activists criticize Saudi Arabia’s investments as “sportswashing” to distract from human rights abuses like the killing of journalist Jamal Khashoggi. The IMF estimates the kingdom needs $80 per barrel of oil to avoid a budget deficit.
Aramco raised a record $29.4 billion in its 2019 IPO by selling a sliver under 2% of its shares. Saudi Crown Prince Mohammed bin Salman has transferred 8% of Aramco to the kingdom’s sovereign wealth fund to help finance Vision 2030 projects.
