By Hadeel Al Sayegh
DUBAI (Reuters) – Saudi state oil giant Aramco expects to pay $31 billion in dividends to the Saudi government and its shareholders, despite reporting a lower first-quarter profit on Tuesday, hit by lower oil prices and volumes sold.
The Saudi government, which directly owns about 82.2% of Aramco, relies heavily on payments from the company, which also include royalties and taxes.
The kingdom, the world’s largest oil exporter, is spending billions of dollars to diversify its economy away from crude oil.
Aramco reported a 14% drop in first-quarter net profit to $27.3 billion for the three months ended March 31, in line with analyst estimates and down from $31.9 billion a year ago. year earlier, according to a company earnings release.
The company declared base dividends for the first quarter totaling $20.3 billion and a performance-related dividend distribution of $10.8 billion to be paid in the second quarter.
It said it expects total dividends of $124.3 billion to be declared in 2024, including $43.1 billion in performance-related dividends.
OPEC+ has implemented a series of production cuts since late 2022, amid rising output from the United States and other non-member producers, and concerns about demand as major economies are struggling with high interest rates.
Brent crude has averaged around $83.50 so far in 2024, while Saudi Arabia needs oil at $96.2 to balance its 2024 budget, according to IMF forecasts. With a projected budget deficit of 79 billion riyals ($21.07 billion) this year, the kingdom could delay some of its multiple megaprojects.
Finance Minister Mohammed Al Jadaan recently said the kingdom’s Vision 2030 plan to transform its economy would be adjusted where necessary, with some projects scaled back or extended and others accelerated amid a challenging environment.
The kingdom could also raise up to 138 billion riyals ($36.80 billion) in financing in 2024, up from $23 billion initially estimated at the start of the year.
In late January, the Saudi government ordered Aramco to abandon its expansion plan to increase production capacity to 13 million barrels per day (mbpd), returning to the previous target of 12 mbpd.
Two projects that were part of the expansion plan – Safaniyah and Manifa – are now on hold, while three others are underway.
On Tuesday, Aramco said Marjan and Berri were expected to come on stream in 2025, adding 300 million barrels per day and 250 million bpd respectively, while Zuluf was on track to add 600 million bpd by 2026.
Maximum production capacity will be optimized to maintain it within the objective of 12 million b/d despite ongoing projects.
Saudi Arabia is set to sell more shares of energy giant Aramco, three people familiar with the matter told Reuters in February, and has lined up Citigroup, Goldman Sachs and HSBC for the sale, according to the one of the sources.
($1 = 3.7502 riyals)
(Additional reporting by Rachna Uppal; editing by Louise Heavens, David Goodman and David Evans)
