Saudi Aramco, the world’s largest oil producer, has announced a 23 percent decline in its third-quarter net profit, primarily attributed to lower oil prices and reduced volumes sold.
For the quarter ending on September 30, the net profit amounted to $32.6 billion. Saudi Aramco explained that the decrease in net profit was due to lower oil prices and volumes, which were partly offset by a reduction in production royalties.
This announcement comes in the wake of Chevron and Exxon Mobil reporting significant year-on-year drops in their third-quarter profits as energy prices cooled.
Saudi Arabia, the world’s leading oil exporter and the de facto leader of the OPEC group of oil-producing nations, recently declared that it would continue its voluntary oil output cut of 1 million barrels per day (bpd) until the year’s end, with a plan to review the decision next month.
Aramco disclosed that the total hydrocarbon production for the quarter averaged 12.8 million barrels of oil equivalent per day.
In terms of financials, Aramco’s revenue fell from $144.99 billion a year earlier to $113.09 billion during the quarter. Additionally, royalty and other tax payments dropped from $24.3 billion to $14.7 billion.
The Saudi government remains the largest shareholder in Aramco, directly holding 90.19 percent of the company, with the sovereign Public Investment Fund (PIF) at 4 percent, and PIF subsidiary Sanabil at another 4 percent, according to LSEG data.
In parallel, Saudi Arabia recently reported a budget deficit of approximately $9.5 billion in the third quarter. This contrasts with a budget surplus of nearly $30 billion in the entirety of 2022. The country is pursuing an economic transformation plan, known as Vision 2030, which seeks to expand the private sector and promote non-oil growth.
Saudi Aramco remains optimistic about the future, noting that energy demand is expected to increase in the mid- to long-term. The company is also continuing to invest through its largest capital program in history.
While Aramco’s capital expenditure in the quarter increased to $11 billion from $9 billion in the previous year, it has revised its 2023 capex forecast to a range of $48 billion to $52 billion, narrowing it from the previous estimate of $45 billion to $55 billion.
Notably, Saudi Aramco’s initial public offering (IPO) in late 2019 was the world’s largest, raising $25.6 billion, with subsequent share offerings increasing the total to $29.4 billion. The company is reportedly considering a secondary share offering on the Riyadh bourse, which could raise as much as $50 billion, according to reports from September 2023.
In 2021, Crown Prince Mohammed bin Salman, Saudi Arabia’s de facto ruler, had announced plans for Saudi Aramco to sell more shares, with the proceeds earmarked to support the Vision 2030 initiative and the Public Investment Fund (PIF).