Aramco records Q2 profits of $30 billion, marking nearly 40% decline from last year

On Monday, Saudi Arabia's state-run oil giant, Aramco, announced a second-quarter profit of $30 billion, marking a nearly 40% decrease compared to the same period the previous year. The decline was attributed to lower oil prices. The company's total sales reached just over 400 billion riyals (approximately $106 billion), down from 562 billion riyals ($150 billion) in the second quarter of 2022. In its earnings report submitted to the Saudi stock exchange, Aramco noted that the decrease was primarily due to the impact of reduced crude oil prices and weakening margins in refining and chemicals.

Aramco reported a net income of 112.8 billion Saudi riyals ($30 billion) in contrast to 181.6 billion riyals ($48 billion) during the second quarter of 2022, marking a decline of 37.8%. Despite this decline, Aramco decided to increase its dividend paid out to investors to 110.18 billion riyals ($29.38 billion), compared to $18.8 billion in the second quarter of 2022. This dividend adjustment is tied in part to the company's exceptional earnings in the previous year.

Aramco's CEO, Amin Nasser, remarked, "Our strong results reflect our resilience and ability to adapt through market cycles," in a statement accompanying the earnings report. Notably, Fortune magazine recently ranked Aramco as the second-largest company in the world by revenue, surpassed only by Walmart and preceding Amazon and Apple. This recognition followed Aramco's record-breaking profit of over $160 billion in 2022, the highest ever reported by a publicly traded company.

However, Aramco's impressive profits are expected to face increased scrutiny later this year during the annual UN climate talks hosted by the United Arab Emirates, another prominent oil producer. These talks aim to promote global efforts to reduce emissions and decrease dependence on fossil fuels. Aramco's elevated earnings were partly fueled by a surge in oil prices triggered by geopolitical events such as Russia's invasion of Ukraine. International oil prices reached over $120 a barrel in June 2022 before stabilizing in the range of $75 to $85 for much of the subsequent year.

In response to weaker demand from China and rising interest rates aimed at curbing inflation, Saudi Arabia has consistently reduced its oil production in recent months and encouraged fellow OPEC members to do the same. This approach aims to bolster oil prices. The country relies on higher oil prices to support Vision 2030, an ambitious and comprehensive plan to revamp its economy and establish itself as a regional hub for business and tourism. Vision 2030 encompasses several significant projects, including the creation of a futuristic $500 billion city along the Red Sea coast.

Furthermore, Saudi Arabia has invested substantial amounts in tourism, entertainment, and sports, including a controversial merger with the PGA Tour and the recruitment of prominent soccer players for local clubs. Critics accuse the country of using such initiatives to divert attention from its human rights record, marked by involvement in the Yemeni conflict, a crackdown on dissent, and the 2018 killing of journalist Jamal Khashoggi.

According to the International Monetary Fund, Saudi Arabia needs an oil price of about $80 a barrel to prevent running a deficit. On Friday, benchmark US crude oil for September delivery increased by $1.27 to reach $82.82 a barrel, while Brent crude for October delivery rose by $1.10 to hit $86.24 a barrel.

Aramco previously achieved a historic milestone in 2019 by raising $29.4 billion through an initial public offering (IPO), during which it sold a minor fraction of less than 2% of the company's ownership to investors. Crown Prince Mohammed bin Salman, the key architect of Vision 2030 and Saudi Arabia's de facto ruler, has gradually transferred 8% of Aramco to the country's $700 billion sovereign wealth fund over the past two years. This move aims to reinforce the company's financial position as it supports extensive infrastructure projects.

With inputs from AP