Saudi Oil Giant Aramco Sees Profit Dip Amid Slumping Crude Prices
Earnings Take a Hit
Aramco, the Saudi state-owned oil behemoth, has reported a significant 15.4% decline in net profit for the third quarter. The downturn is attributed to the plummeting crude oil prices and weakening refining margins. Despite this, the company has maintained a substantial dividend of 31.05 billion.
Net Income Takes a Knock
Aramco’s net income for the July-September period stood at $27.56 billion, surpassing the estimated $26.9 billion. However, this figure represents a 5% drop from the previous quarter’s $29.1 billion. The decline is largely due to lower global oil prices, reduced demand, and prolonged OPEC+ production cuts led by Saudi Arabia.
Oil Prices Continue to Slide
The average selling price of oil dropped from $85 per barrel in the second quarter of 2024 to $78.7 per barrel during the third quarter, according to Al Rajhi capital. This decline is partly attributed to the growth of non-OPEC supply volumes.
Cost-Cutting Measures
Aramco’s year-on-year decline was partially offset by a reduction in selling, administrative, and general expenses. This was driven by a gain from derivative instruments and a decrease in production royalties, largely reflecting lower crude oil prices and a lower average effective royalty rate compared to the same quarter last year.
Dividend Breakdown
The company’s dividend includes a base payout of $20.3 billion and a performance-linked one of $10.8 billion. Earnings before Interest and Taxes (EBIT) came in at $51.45 billion in the third quarter, down 17% year-on-year.
Capital Expenditure Guidance
Aramco’s capital expenditure guidance has been increased by 20% to $13.23 billion. This move is in line with the broader trend across oil majors, whose third-quarter profits have also suffered from declines in crude prices and refining margins.
Average Realized Crude Price
Aramco achieved an average realized crude price of $79.3 per barrel in the third quarter, compared to $89.3 per barrel in the same period last year. As the world’s largest crude exporter, Saudi Arabia produces roughly 9 million barrels per day of crude.
OPEC+ Output Hike Delayed
Over the weekend, OPEC+ oil producers agreed to delay a planned December output hike by one month. This move is likely to impact the already volatile crude prices.
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