RIYADH: Saudi oil giant Aramco, a cornerstone of the Saudi economy, announced its expectations for dividend payouts in 2025, forecasting a significant reduction to $85.4 billion, approximately 30 per cent lower than the previous year.
The anticipated decline is symptomatic of broader challenges faced by the company, including decreased profitability attributed to lower sales and rising operational costs.
In the first quarter of 2025, Aramco allocated a mere $200 million in performance-linked dividends—an alarming contrast to the robust distributions of the previous year, which exceeded $124 billion.
Among these payouts, $43.1 billion were categorised as performance-linked, a new system introduced in 2023 to incentivise financial performance beyond the base dividend. Such a shift underscores the challenges facing the company amid fluctuating oil prices and market dynamics.
Production cuts
Aramco’s net profit saw a considerable decline of over 12 per cent, falling to $106.2 billion in 2024. The average realised oil price decreased from $83.6 in 2023 to $80.2, reflecting global shifts and reduced demand. The company attributed this downturn to a combination of lower revenue from sales, increased operational expenditures, and diminished finance income.
Since mid-2023, Aramco has been operating at approximately 75 per cent of its capacity, a strategic move following Saudi Arabia’s announcement of significant production cuts. These actions aimed to stabilise market conditions but have evidently impacted revenue generation and overall profitability.
Moreover, the kingdom maintains a strong financial reliance on Aramco’s payouts, with the government owning 81.5 per cent and the Public Investment Fund controlling an additional 16 per cent. The substantial dividends from Aramco play a crucial role in mitigating the fiscal deficit faced by Saudi Arabia, accentuating the importance of the company’s financial health to the broader economy.
Amidst these challenges, Aramco remains committed to sustaining capital investments. The company plans to allocate between $52 billion and $58 billion for investments in 2025, following a reported $53.3 billion in capital expenditures in 2024. However, the decline in free cash flow—down nearly 16 per cent from the previous year to $85.3 billion—highlights the pressing financial strain.
