Saudi Arabian state oil company Aramco's second quarter profit plunged 38 percent compared with the $48.4 billion profit recorded in the same period of last year. The Saudi oil giant's profits in the second quarter were clocked at $30 billion, more or less in line with the analyst estimates.
The huge drop in profits at Aramco came in the backdrop of a steep decline in crude prices compared with the highs recorded in the last year. Saudi Arabia and Russia have been trying hard to prop up the prices by cutting output, but prices are far lower at about $85 per barrel, compared with the high of $113 recorded a year ago.
In addition to lower crude prices, weaker refining and chemicals margins also pushed Aramco's profits down. "Despite the economic headwinds, we see signals that global demand remains resilient, supported by an ongoing recovery in the aviation sector," Aramco CEO Amin Nasser told said in an earnings call, Reuters reported.
"At Aramco, our mid to long-term view remains unchanged. With a recovery anticipated in the broader global economy, along with increased activity in the aviation sector, ongoing investments in energy projects will be necessary to safeguard energy security," the CEO added.
Despite the profits plunging, Aramco CEO said the company will pay the same dividends as in the first quarter. This means, the company will pay a whopping dividend of $19.5 billion for the second quarter. The oil giant will also distribute performance-linked dividends over six quarters. "Our plan to maintain a sustainable and progressive dividend for our shareholders remains intact," the CEO said.
In early June Saudi Arabia and Russia further slashed crude output as they attempted to extract more revenue from the commodity. Riyadh said it was extending its one million barrels per day output cut for another month and Moscow said it would slash its oil exports by 500,000 barrels per day in August. Saudi Arabia, which has been leading the Opec bloc in reducing crude availability, hinted that its output cut was likely to be extended beyond August.
40% of World's Crude Oil
The OPEC+ cartel, of which Saudi Arabia and Russia are key players, pumps around 40 percent of the world's crude oil. Both these producers need higher revenue from oil to meet their budget agenda. While the Saudis have embarked on highly ambitious development projects, Russia depends on higher oil revenues to sustain its military campaign in Ukraine.
The aggressive output cuts by Saudi Arabia and Russia have had a positive impact on the prices, with Brent crude edging up to $86. According to analysts, oil prices are expected to rise in the coming quarters. Goldman Sachs has said it expects Brent prices to top $86 a barrel by December and $93 per barrel by next year, CNBC reported.