Saudi Arabian oil giant Aramco is the largest oil company in the world, and is the second largest company in the world by revenue. In 2022 Aramco posted a net profit of $161.1 billion in 2022, the companies largest profit ever recorded. Aramco's 2023 profits dropped to $121.3 billion in 2023, Aramco claims the lower profits were due to lower crude oil prices coupled with a lower volume sold and a tightening margin for the refining process. With revenue, profits, and free cash flow all declining Aramco posted their highest ever dividend totaling to $31 billion dollars. Aramco CEO Amin Nasser spoke at OPEC two weeks ago and tried to clear any concern with the health of Aramco. Nasser stated, “We expect the global oil market to remain healthy over the remainder of this year, and we expect it to be fairly robust with growth of about 1.5 million barrels”.
Aramco is also dropping plans to increase their maximum barrel capacity to 13 million barrels. Nasser claims that this will increase flexibility and allow for Aramco to increase R&D in their liquids-to-chemicals business and to increase gas production. Aramco has plans to grow gas production by 60% from 2021 levels by 2030.
It seems that oil production may be losing its luster with tightening production margins and Aramco posting a declining revenue, free cash flow, and profits. I believe that Aramcos increased interest in other energy production methods is a strong indicator that oil is on its way out as the number one source of energy for the planet. Increased investment in cleaner energy may be showing strength in 2023 and forcing Aramco to realign their business interests for the inevitable future.
Article link: https://www.cnbc.com/2024/03/10/aramco-posts-25percent-fall-in-full-year-profit.html
ReplyDeleteAs someone who just took FSA with Younkman, I feel like they are trying to cover up their financials and still bring optimism to some red flags in their financial. Cash flow, revenue, and profits are declining at a large rate and instead of addressing the actual issue, they increase barrel capacity, and pay out an even greater dividend to their shareholders even though they that would further their issue and bring a greater decline to their free cash flow. From a business perespetive I would understand why they did that. They are trying to assure their shareholders that the decline in profits isnt going to affect their business so they pay out more money to the people that invest in Aramco. Still, I think that their decline in revenue and profits alludes to the shift towards sustainable resources instead of oil and envriomental consumer behavior that effect oil consumption. I'm interested to see how their financial look in the next report and see though if theur barrel capacity increase helped the company as they intended it to.
ReplyDeleteIs Aramco's pivot towards alternative energy sources a sign of declining profitability in oil production? What implications does this shift have for the future of the global energy landscape?
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