Saudi Aramco’s Oil Shook Up

Saudi Aramco’s Oil Shook Up
Daniel Johnston

7 months ago2 mins

What’s going on here?

Saudi Aramco took a slip, reporting an unsurprising dip in profit on Tuesday.

What does this mean?

The oil market has lost some of its greasy charm in the last year, with inflation and rising interest rates stoking folks’ recession fears and throwing a wet blanket on oil demand and prices. That dreary backdrop meant analysts weren’t exactly gobsmacked by Aramco’s profit dropoff – down 19% last quarter from the same time the previous year. The twist: bearing the market in mind, the firm is actually moving like greased lightning. After all, Aramco’s profit still outstripped both expectations and the previous quarter’s takings. And if that wasn’t enough for investors, Aramco announced plans to introduce a performance-linked dividend on top of its industry-leading base dividend. Experts think that high-rolling move could raise payouts by over $20 billion this year – and that prospect propelled Aramco’s stock back to September’s highs.

Saudi Aramco profit

Why should I care?

Zooming in: Oiling the country’s wheels.

There’s a bit of a backstory to that dividend decision. The Saudi government spent more money than it brought in last quarter, thanks to dwindling oil revenues and expensive attempts to diversify the economy. And since the government owns almost all of Aramco, the majority of these extra dividend payouts will flow right into state coffers. And if that’s not enough to make up the difference, it could always auction off more Aramco shares in a secondary offering – an option it’s already been weighing up for a while.

Saudi Aramco stock
Source: Google Finance

The bigger picture: Back-up plans.

Aramco’s skeptical about the West’s green-energy enthusiasm, but it isn’t idly twiddling its thumbs. The oil titan has been spending big on petrochemical projects in Asia, and that makes a lot of sense: Aramco knows that demand for plastics, fertilizers, and paint (usually made from oil-based chemicals) is likely to climb in the coming decades, which could plug any gap in gasoline and diesel demand.



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