Aramco's Q1 Earnings Report Shows 19% Drop

On Tuesday, Aramco, the state-owned oil company of Saudi Arabia, reported a 19% decrease in first-quarter earnings, with a net income of $31.9 billion compared to $39.5 billion the previous year, due to the decline in oil prices. However, this exceeded the forecast of $30.5 billion by Reuters analysts.

  • Aramco's net profit increased by 3.75% from the previous quarter, supported by higher finance and other income as well as lower taxes. The company's first-quarter dividend, increased in Q4 to $19.5 billion, will be paid in Q2
  • Aramco reported a quarterly cash flow from operating activities of $39.6 billion and free cash flow of $30.9 billion, both slightly higher than the previous year

Aramco, the world's largest oil exporter, announced that it will pay a performance-linked dividend in addition to the $19.5 billion dividend, targeting 50% to 70% of its free cash flow, at the discretion of the board based on the company's performance. On Tuesday, shares rose 3.2% in early trading in Riyadh.

Oil and Gas Prices Decline Amid Lackluster Demand

In emphasizing the importance of its downstream strategy, Aramco CEO Amin Nasser highlighted the company's investments in petrochemical and other operations that leverage cutting-edge technologies to increase liquids-to-chemicals capacity and meet the anticipated demand for petrochemical products. Despite uncertainties regarding global growth and economic concerns, Nasser believes that hydrocarbons will continue to be critical components of the global energy mix for the foreseeable future, and the company remains committed to its capacity expansion plans.

  • Meanwhile, Aramco's 70% owned subsidiary, SABIC, reported a 90% drop in its first-quarter net profit and warned of continued pressure on margins
  • Despite oil and gas prices surging at the start of 2022, Brent crude has declined by 9% year-to-date and more than 17% year-on-year, reflecting economic uncertainties and lackluster demand growth due to anti-inflationary actions by the U.S. Federal Reserve and the ECB


But Shell Shines

British oil company Shell announced its first-quarter profit, which exceeded analysts' expectations, marking a record period of strong results due to the surge in commodity prices following Russia's invasion of Ukraine in 2022. The company's adjusted earnings for the first three months of the year were reported to be $9.6 billion, compared to $9.1 billion in the same period in the previous year and $9.8 billion in the final three months of 2022. The stock price of the company rose 2.2% during mid-morning deals.

  • Despite having a considerable amount of cash, Shell decided to maintain its share buyback program rate at $4 billion over the next three months and its dividend at $0.2875 per share
  • The company credited its strong quarterly results to improved operational performance and lower day-to-day business costs. Moreover, fuel trading and optimization offset the impact of weaker oil and gas prices

The CEO, Wael Sawan, expressed his satisfaction with the first-quarter earnings, stating that the company provided a reliable source of energy while delivering strong results despite ongoing volatility. The company's announcement follows BP's report of a decrease in first-quarter profit, beating analysts' expectations in oil and gas trading. However, BP's shares fell as the company revealed plans to reduce its share buybacks.

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products. Please note that the writer of this article is not registered as a financial advisor.

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