Saudi oil giant Aramco reported a decline in its 2024 profits on Tuesday and announced a 30% reduction in its total dividend for the year, putting further pressure on the finances of the Kingdom of Saudi Arabia.
As the world’s largest crude producer and exporter, Aramco recorded a net profit of $106.2 billion for 2024, a decrease from $121.3 billion in 2023. This drop is attributed to lower average oil prices in 2024 compared to the previous year, along with ongoing production cuts as part of the OPEC+ agreement.
For the fourth quarter, Aramco’s board declared a base dividend of $21.1 billion, representing a 4.2% increase compared to the previous year. However, the performance-linked dividend was significantly reduced to just $200 million for Q4.
In contrast, for the third quarter of 2024, Aramco declared a base dividend of $20.3 billion, along with a performance-linked dividend of $10.8 billion, bringing the total dividends for Q3 to $31.1 billion.
Aramco also stated that it expects total dividends of $85.4 billion to be declared in 2025. This marks nearly a 30% reduction from last year’s $124 billion in dividends, which included $43.1 billion in performance-linked payouts.
The lower dividends will reduce revenues for Saudi Arabia, the majority shareholder in Aramco, holding nearly 81.5% directly, along with an additional 16% stake via the Public Investment Fund (PIF). As the Kingdom heavily depends on oil exports and Aramco’s dividend income to fund its Vision 2030 plan, which aims to diversify the economy and reduce reliance on oil, the dividend cuts could strain public finances.
With this shortfall in revenue, analysts suggest that Saudi Arabia may have to increase debt issuance this year to cover the widening budget deficit. The Kingdom is estimated to require oil prices around $90 per barrel to balance its budget.
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