The oil giant has reduced its profits to balance the shareholders’ payments, with the increase in capital investments, amid low crude prices and advanced market conditions.
Saudi oil, known as Aramco, is re -calibrating its profits strategy because it travels in weaker oil prices and high capital investment requirements. The largest oil and gas producer in the world plans to distribute $ 85.4 billion of profits this year – about 30 % of 124.3 billion dollars in 2024 – leading to a shift in financial priorities.
The company recorded a 12 % decrease in net income, as it decreased to 106.2 billion dollars from 121.3 billion dollars in the previous year, noting “low prices, low production volume, and the weakest estuary margins.” On this background, Aramco directs more resources towards long -term growth, especially in expanding natural gas and investing infrastructure.
For example, Brent crude oil was recently traded by about $ 70 a barrel, reflecting a long chip in prices. Three years ago, it was about $ 100 a barrel.
For AramCo and other energy companies, budget profit payments must be carefully against factors such as energy prices, global demand and geographical preparation and financial obligations – especially capital expenditures that support future growth.
Aramco said it is planning to invest between $ 52 billion and $ 58 billion of capital expenditures in 2025, compared to $ 53.4 billion last year. One of the main focus of the CAPEX strategy is to expand natural gas opportunities. The company’s financial guidance confirms that the capital investment remains a top priority.
The ARAMCO profit structure consists of two components: basic profits distributions and a variable profit distribution associated with performance. The company plans to pay basic profits of $ 84.6 billion this year, while variable profit distributions are expected to be 880 million dollars – they float dramatically from about $ 43 billion in 2023, according to Reuters.
Other energy companies have adopted double -distribution frameworks, providing flexibility when low oil and gas prices.
Meanwhile, Aramco said it plans to increase its profits in the first quarter by 4.2 % to 21.1 billion dollars. However, with a decreased variable profit distributions, the total shareholders’ payments will decrease compared to last year.
During the collective call of the fourth quarter of the company with analysts on March 3, ARAMCO executives have highlighted large profits distributions in recent years.
“We have paid more profits than any other listed company over the past five years, as about $ 440 billion has been distributed,” said the president and CEO of Amin Nasser, according to a copy of the call.
The company’s variable profits distributions are associated with performance, as it pays 50-70 % of the free cash flow after offering basic profits and external investments. The profits of the first quarter will be at the end of this range.
Reducing profits not only affects shareholders, but also affects the Kingdom of Saudi Arabia, which carries the majority of Aramco and uses profit revenues to help finance economic development in the country.
In addition, low profit distributions will reduce stock profit returns.
In a research note this week, Allen Judd, Mouriningstar analyst, wrote that he expected Aramco to cut his performance -related profits “given the rise in debts, low oil prices, and increase in capital investment.”
However, he added that low -wheel drive means “AramCo’s return is less competitive with American and European integrated companies.”
Without a doubt that Aramco executives are closely watching this.
