Aramco, the Saudi oil giant, has reported a profit of $121 billion in 2023, making it the second-highest profit ever recorded by the company. Despite lower energy prices, Aramco’s strong performance is attributed to the production cuts implemented by the OPEC+ alliance to boost global energy prices. However, the decrease in profit poses a challenge for Saudi Arabia as it aims to diversify its economy and reduce its reliance on oil revenues.
Lower crude oil prices, reduced volumes sold, and weakening refining and chemicals margins were cited as the main factors contributing to the decline in profit. Nevertheless, Aramco managed to increase dividends to its stockholders to over $31 billion in the fourth quarter, according to filings.
Aramco’s overall revenue for 2023 was reported at $440 billion, down from $535 billion in the previous year. Despite economic headwinds, Aramco CEO Amin H. Nasser emphasized the company’s resilience and agility in generating healthy cash flows and maintaining high levels of profitability.
With an output of 12.8 million barrels of oil per day, Aramco has been instructed by the Saudi government to maintain its production levels, despite earlier plans to increase output. Saudi Arabia, as a leader in the OPEC cartel, has joined forces with Russia and other non-OPEC members to limit production and boost global oil prices. Currently, benchmark Brent crude is trading under $82 a barrel.
Aramco holds a market value of $2 trillion, making it the world’s fourth most valuable firm, trailing behind Apple, Microsoft, and NVIDIA. Its stock traded slightly higher on the Tadawul stock market at $8.64 per share.
Saudi Arabia’s abundant oil resources, located close to the surface of its desert expanse, make it one of the most cost-effective places to produce crude oil. Crown Prince Mohammed bin Salman intends to leverage the country’s oil wealth to transition away from oil sales. One of his ambitious projects is the $500 billion futuristic desert city called Neom. However, the company’s substantial profits have drawn criticism from activists concerned about the impact of fossil fuel consumption on climate change.
In a recent development, Prince Mohammed transferred an additional 8% of Aramco shares, worth over $160 billion, to the country’s sovereign wealth fund. While the majority of the company remains under the control of the Al Saud royal family, a small portion is traded on the Tadawul stock market.
Aramco’s financial performance in 2023 highlights its ability to navigate challenging market conditions and maintain profitability. As Saudi Arabia continues its efforts to diversify its economy, the success of Aramco remains crucial in supporting the country’s ambitious development projects and reducing its dependence on oil revenues.
