Saudi Aramco profits dip as oil output falls

Profits for Saudi Aramco have dipped after it sold less crude and its refining margins weakened.

The world’s largest oil producer reported a net profit of $29.1 billion for the second quarter, down from $30.1 billion a year earlier, although the decline was less severe than analysts had forecast.

The company said that it produced 12.3 million barrels of oil equivalent a day, a measure of its output that includes some gas, compared with 13.5 million a year earlier. Earlier this year it scrapped a multibillion-dollar investment plan to raise production from 12 million barrels a day to 13 million barrels by 2027.

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Despite the fall in profits, the company pressed ahead with paying another $31.1 billion in dividends, an increase from $19.5 billion a year earlier, which included a performance-linked return of $10.8 billion to be paid before the end of September.

Saudi Aramco introduced the performance-based dividend in the second quarter of last year to increase returns to shareholders, namely the state and the country’s sovereign wealth fund.

It benefited from an increase in oil prices during the June quarter as fears of an escalation in tensions in the Middle East pushed the average realised crude price to $85.7 a barrel, from $78.8 a barrel in the same period last year.

However, the price of Brent crude, the international benchmark, has fallen sharply over the past week as weak economic data from the US has roiled markets. Brent crude was $0.05, or 0.07 per cent, lower in mid-morning trading on Tuesday at $76.25 a barrel, while West Texas Intermediate was $0.11, or 0.15 per cent, higher at $72.94.

Amin H Nasser, Saudi Aramco chief executive, said the company had “made significant progress in key strategic areas” during the second quarter, including boosting its gas production and investing in cleaner types of energy.

In July the company raised another $12.4 billion by offering shares to the market, in line with plans to invest in newer industries and diversify Saudi Arabia’s income stream away from oil and gas under the country’s Vision 2030 programme.

Last week energy ministers from the Opec+ group of countries agreed to keep in place most of its production cuts until the end of next year, aimed at boosting prices in the face of weak demand growth.

Saudi Aramco has exclusive rights to exploit the kingdom’s vast oil reserves. Its listing on Saudi Arabia’s Tadawul exchange in December 2019 ranked as the world’s biggest initial public offering.

The Riyadh-listed shares were trading 1.5 per cent higher at 27.20 riyals (£5.70) by Tuesday’s close.