Saudi Aramco Reports $106 Billion Profit in 2024 Amid Lower Oil Prices

Saudi Aramco reported a profit of $106.25 billion for 2024, a 12% drop attributed to falling energy prices. The report highlights financial implications for Saudi Arabia’s extensive development plans under Crown Prince Mohammed bin Salman, particularly as OPEC+ is set to increase oil production. This situation is expected to challenge Aramco’s dividend payments and fiscal stability in the kingdom.

On Tuesday, Saudi Aramco, the state-owned oil corporation, announced a profit of $106.25 billion for 2024, which marks a 12% decline from the previous year. This downturn is attributed to lower energy prices impacting the kingdom’s extensive development initiatives. Crown Prince Mohammed bin Salman is advancing a $500 billion NEOM megacity project and initiating significant infrastructure investments for the upcoming 2034 FIFA World Cup.

The decrease in earnings also coincides with commitments made by the Crown Prince, including a potential $600 billion investment from the United States, aimed at improving relations with President Donald Trump. In addition, the dynamics of the OPEC+ alliance suggest an increase in oil production that could lead to further debt accumulation in order to fund the Crown Prince’s ambitious projects.

Aramco reported revenues of $436 billion for 2024, a slight decrease from $440.88 billion in 2023. The annual profit of $121 billion in 2023 had also been affected by declining energy prices. Factors contributing to this year’s reduction include lower sales, higher operating costs, and diminished financial income, according to the company’s filing.

Aramco’s stock is currently valued at approximately $7.33 per share, down from a peak of $8.71, reflecting the overall decline in oil prices, with Brent crude priced at $73—down 10% this year. The company’s market capitalization is $1.74 trillion, making it the sixth-most valuable enterprise globally, following tech giants such as Apple and Microsoft.

The company has announced a fourth-quarter dividend payment of $21.36 billion, which includes a modest performance dividend of $220 million. Expectation for total dividends this year has decreased to $85.4 billion, which may further strain the financial resources available to the Saudi monarchy. In light of these developments, Aramco’s CEO, Amin H. Nasser, emphasized the company’s net income and dividend reliability as indicators of its resilience.

The recent results from Aramco coincide with a meeting of OPEC+, where a decision was made to increase oil production commencing in April—the first uptick since 2022—which could further depress oil prices. This follows external pressures, including criticisms from President Trump regarding the cartel’s influence on pricing.

Given Saudi Arabia’s abundant oil reserves, which are relatively inexpensive to extract, any increase in oil prices by $10 per barrel could yield an additional $40 billion in annual revenue for the kingdom, as noted by the Institute of International Finance. Although the Saudi government retains the majority of Aramco’s shares, the company made a minor public offering in late 2019 and is contemplating additional share releases.

In summary, Saudi Aramco’s reported profit of $106.25 billion for 2024 reveals a significant decline influenced by diminishing oil prices. This has ramifications for the ambitious projects envisioned by Crown Prince Mohammed bin Salman, as the company navigates the challenges of production increases within OPEC+. The company’s financial performance remains a pivotal concern for the Saudi monarchy as it seeks to balance investments with revenue generation.

Original Source: apnews.com