Aramco raised its dividend despite a retreat in energy prices and lower production, a boost for Saudi Arabia as it faces a widening budget deficit.
The total payout of about $31 billion, which includes a special component, for the fourth quarter rose even as lower oil output pushed net income down 25% year-on-year. Aramco guided that the total distribution to investors and Saudi Arabia’s government this year will be higher than in 2023.
The world’s biggest crude oil exporter provides much of the Saudi government’s income via generous dividends. The payout is becoming ever more vital as Crown Prince Mohammed bin Salman pursues expensive projects such as the futuristic project of Neom, the purchase of high-profile footballers and stakes in sporting leagues, while looking to diversify the economy from oil.
The higher dividend also comes as the Saudi government is reviving plans for a follow-on offering of Aramco shares this year. Global investors had balked at the kingdom’s valuation expectations and the kingdom’s low yield compared with industry peers during the firm’s 2019 IPO.
Potential investors will keep an eye on the state’s budget shortfall. The Saudi government is predicting a deficit every year until 2026, pushing it to delay past 2030 some of the projects that it launched as part of its economic transformation plan. It also ordered Aramco last month to halt the expansion of its production capacity, helping free up spending for other areas. (BusinessDay)
