Saudi Aramco, the largest oil company owned by the Saudi government, disclosed its financial performance for the second quarter, revealing a 38% decline in net profit. The company reported a net profit of 112.81 billion riyals (approximately US$30.07 billion) for Q2, significantly lower than the US$48.4 billion recorded in the same period last year. This dip in profits is in line with the challenges faced by the global oil industry, which has been grappling with falling hydrocarbon prices.
Despite the significant drop, Aramco’s Q2 earnings were slightly above analysts’ expectations, who had predicted a net profit of US$29.8 billion in a survey conducted by the company.
In a letter submitted to the Saudi Stock Exchange, Aramco attributed the steep decline in profits to lower crude oil prices and reduced refining and chemicals margins. As a result, the company plans to pay basic dividends amounting to US$19.51 billion for the second quarter.
Comparing the figures to Q2 2021, the net profit is down 38% from the US$48.4 billion reported last year. However, the results for Q2 2022 reflect a substantial 90% increase compared to the same period in 2021, a trend driven by the rise in energy prices, which were influenced by geopolitical events such as the Russian war in Ukraine.
It is essential to note that Saudi Aramco’s recent drop in profitability aligns with industry-wide trends, as evidenced by British oil giant BP’s Q2 results, which reported a nearly 70% year-over-year decline in profits on August 1st. Additionally, other major players in the industry, including ExxonMobil, Shell, and Total Energy, also reported sharp drops in earnings due to the overall decline in oil prices affecting the entire sector.
The challenging operating environment for the global oil industry underscores the significance of geopolitical factors, fluctuations in energy demand, and supply dynamics, all of which continue to impact oil prices. Companies in the sector will need to navigate these uncertainties and implement strategies to enhance resilience in the face of volatile market conditions.
As the oil industry grapples with ongoing challenges, investors, analysts, and industry observers are closely monitoring financial reports to gain insights into the sector’s performance and future prospects. The Saudi Aramco results serve as a crucial barometer of the industry’s health and its capacity to weather economic headwinds.