Saudi oil giant Aramco reported a first-quarter net profit of $31.88 billion on Tuesday, marking a nearly 20% decline from the same period last year due to concerns about global recession and lower crude oil prices. The company attributed the drop to fluctuating commodity prices and reassured investors that its low-cost upstream production strategy would help it withstand market volatility.
Benchmark Brent crude traded at around $76 a barrel early on Tuesday, down significantly from its high of $125 in the past year. In March, Aramco announced earnings of $161 billion for 2022, drawing immediate criticism from environmental activists concerned about climate change.
In response to these financial results, the Saudi government announced plans on Tuesday to begin issuing performance-based dividends to stockholders in addition to their regular dividends.
"Saudi Aramco's first-quarter profits were affected by lower crude oil prices," said Ali Al-Qahtani, an energy analyst based in Riyadh. "However, with their low-cost upstream production strategy and recent investments into renewable energy sources, they remain well-positioned for future growth."
Despite recording a net income of $31.9 billion this quarter – down from $39.5 billion during Q1 2022 – analysts had anticipated seeing some decline but still expected a slightly smaller drop around $30.5bn. Despite this setback during Q1 2023, Aramco posted record-breaking annual net income for 2022 that was up by 46.5%.
Stockholders welcomed the news about performance-based dividends as an incentive for stronger corporate governance within the company.
"We believe that linking our dividend payments directly to our overall business performance will encourage greater transparency and accountability," said Abdullah Al-Mansoury, one such stockholder based in Jeddah.
Though faced with recent setbacks, Aramco remains committed to navigating market fluctuations and maintaining its position as a leading energy provider.
"Despite the challenges we have faced during this quarter, our strong financial performance demonstrates our resilience in adapting to changing market conditions," said Amin Nasser, CEO of Saudi Aramco. "We remain focused on executing our long-term strategy and delivering value for our shareholders."