Saudi Aramco set to pay $31 billion in pay despite dip in Q1 earnings

Saudi Aramco Q1 results: Saudi Aramco, the Saudi Arabian state-owned oil behemoth, remains steadfast in its commitment to pay $31 billion in dividends to the Saudi government and its shareholders, despite experiencing a dip in earnings for the first quarter. This decline, attributed to lower oil prices and reduced volumes sold, underscores the challenges faced by the company amidst market fluctuations.

The Saudi government, holding a significant 82.2 per cent stake in Aramco, heavily relies on these dividends, which constitute a substantial portion of its revenue stream alongside royalties and taxes. As the world's largest oil exporter, Saudi Arabia is strategically navigating economic diversification efforts away from fossil fuels, necessitating stable revenue streams from entities like Aramco.

For the first quarter ending March 31, Aramco reported a 14 per cent decrease in net income to $27.3 billion, aligning with analyst projections. This figure marks a decline from $31.9 billion reported in the corresponding period last year, reflecting the prevailing market conditions.

Aramco's dividend declaration for the quarter includes base payouts amounting to $20.3 billion, supplemented by a performance-linked distribution of $10.8 billion slated for the second quarter. The company anticipates total dividends for 2024 to reach $124.3 billion.

Market dynamics, including OPEC+ output cuts and increased production from non-member states such as the United States, continue to influence oil prices. Despite Brent crude averaging approximately $83.50 thus far in 2024, Saudi Arabia faces a budget-balancing act, requiring oil prices to reach $96.2 to meet fiscal obligations, according to IMF projections.

In response to fiscal challenges, the Kingdom remains adaptable, with Finance Minister Mohammed Al Jadaan signalling potential adjustments to the Vision 2030 plan. These adjustments may entail scaling back or extending certain projects while accelerating others to navigate the evolving economic landscape.

Moreover, Saudi Arabia aims to secure additional financing in 2024, potentially raising up to 138 billion riyals ($36.80 billion), reflecting proactive measures to manage fiscal deficits and sustain economic momentum.

Against this backdrop, Saudi Arabia explores opportunities to further monetise its energy assets, with plans to offer additional shares of Aramco. Citigroup, Goldman Sachs, and HSBC are reportedly among the financial institutions engaged in facilitating this initiative, underscoring ongoing efforts to optimise resource utilisation and enhance shareholder value.

(With Reuters inputs)