Major energy companies have seen a decrease in profits due to the decline in oil prices since last year. In the second quarter, Aramco reported that the average price of oil was just under $79 per barrel, compared to around $113 in the same period the previous year. The prices initially rose after Russia’s invasion of Ukraine but have been slowly decreasing since then.
Despite the lower earnings, Aramco has announced a 12 percent increase in capital expenditures, totaling $10.5 billion. This spending reflects investments in their business.
Aramco made headlines by promising to pay more to shareholders through a new dividend program. In addition to their base quarterly dividend of $19.5 billion, which is a 4 percent increase from the previous year, the company will also pay an additional dividend tied to its performance. This will amount to just under $10 billion in the third quarter, with continuous payouts over the following five quarters. As Aramco is primarily owned by the Saudi government, its earnings are a significant source of financing.
Analysts at RBC Capital Markets have viewed this added dividend as the next logical step for Aramco, given the company’s substantial cash reserves.
Amin H. Nasser, the CEO of Aramco, emphasized the importance of further investments in energy, including both fossil fuels and climate-friendly alternatives like “blue” ammonia, which is produced using renewable power. He stated that while they anticipate a recovery in the global economy and increased activity in the aviation sector, ongoing investments in energy projects are crucial to ensure energy security. Furthermore, he expressed optimism about the potential for new technologies to reduce operational emissions, highlighting the growing interest in alternative, lower-carbon energy solutions.
Looking ahead, oil prices seem to be on an upswing. After briefly surpassing $120 per barrel following the start of the war in Ukraine, prices have generally declined. However, India and China have become major importers of Russian oil, stabilizing the markets. Since June, prices have been noticeably increasing. Currently, Brent crude, the international benchmark, is at around $85 per barrel, while West Texas Intermediate is approximately $82. The rise in prices can be attributed to various factors, including production cuts by Saudi Arabia and Russia, indications that the United States will avoid a recession as inflation eases, and growing concerns about the fighting in Ukraine spreading to the Black Sea, a crucial trading route for vessels transporting Russian crude.