The oil giant has reduced its dividend to balance shareholders’ payments with an increase in capital investments in the midst of lower crude crude prices and changing market conditions.
Saudi oil, better known as Aramco, recaliburs its dividend strategy when it sails the lower oil prices and the rise in capital investment requests. The world’s largest producer of oil and gas plans to distribute $ 85.4 billion in dividends this year – out of around 30% against 124.3 billion dollars in 2024, which reflects a change of financial priorities.
The company declared a 12% drop in net profit, falling to $ 106.2 billion compared to $ 121.3 billion the previous year, citing “lower prices, the drop in production volume and lower margins downstream”. In this context, Aramco directs more resources towards long -term growth, in particular in the expansion of natural gas and investment in infrastructure.
Brent’s crude oil, for example, was recently negotiated at around $ 70 a barrel, reflecting a prolive prices. Three years ago, it was about $ 100 per barrel.
For Aramco and other energy companies, dividend payments must be carefully balanced with factors such as energy prices, global demand, geopolitics and financial obligations – in particular capital expenses that support future growth.
Aramco said it was planning to invest between $ 52 billion and $ 58 billion in capital spending in 2025, compared to $ 53.4 billion last year. A key objective of its CAPEX strategy is to develop natural gas opportunities. The company’s financial directives stress that capital investment remains an absolute priority.
The Aramco dividends structure consists of two components: a basic dividend and a variable dividend linked to performance. The company plans to pay a basic dividend of $ 84.6 billion this year, while the variable dividend should be $ 880 million, considerably against around $ 43 billion in 2023, according to Reuters.
Other energy companies have adopted similar dual dividend executives, offering flexibility when oil and gas prices decrease.
At the same time, Aramco said that he planned to stimulate his basic dividend in the first quarter of 4.2% to $ 21.1 billion. However, the variable dividend lowering so strongly, the total payments of shareholders will decrease compared to last year.
During the Conference Conference of the fourth quarter of the company with analysts on March 3, the leaders of Aramco underlined its distributions of substantial dividends in recent years.
“We have paid more dividends than any other company listed in the past five years, with approximately $ 440 billion distributed,” said president and chief executive officer, Amin Nasser, according to a transcription of the call.
The variable dividend of the company is linked to performance, paying 50 to 70% of the cash flows available after subtracting the basic dividend and external investments. The first quarter dividend will be at the upper end of this beach.
The drop in dividends does not only have an impact on shareholders – it also affects Saudi Arabia, which has majority participation in Aramco and used dividends to help finance the economic development of the country.
In addition, the lower dividend will reduce the performance of the stock dividend.
In a research note this week, Morningstar Allen Good analyst wrote that he had planned that Aramco would reduce his dividend linked to performance “given the increase in debt, the drop in oil prices and the increase in capital investments”.
However, he added that lower payment means “Aramco’s yield is much less competitive with US and European integrated world energy companies”.
Aramco leaders will undoubtedly keep an eye on this.