Saudi Aramco said strong market conditions helped to push its second quarter net income to $48.4 billion, up from $25.5 billion a year earlier.

Maxim Shemetov | Reuters

Saudi state oil giant Aramco reported 112.81 billion riyal ($30.0 billion) in net profit for the second quarter, a fall of nearly 40% from the same period last year amid a decline in hydrocarbon prices.

Second-quarter profit nevertheless came slightly above analyst expectations near $29.8 billion in an Aramco-supplied poll.

In a filing to the Saudi stock exchange — known as Tadawul — the company said the substantive decline was due to lower crude oil prices and weakening refining and chemicals margins.

“Despite the economic headwinds, we see signals that global demand remains resilient, supported by an ongoing recovery in the aviation sector,” Aramco CEO Amin Nasser told the media during a company earnings call Monday. 

The company is following its industry peers by boosting dividend payouts despite the sharp fall in profitability. The oil giant reaffirmed its first-quarter base dividend of $19.5 billion, paid in the second quarter, and declared a second-quarter dividend of $19.5 billion, to be delivered in the third quarter. 

Aramco also said it intends to distribute performance-linked dividends over six quarters, starting with a $9.9 billion distribution in the third quarter.  

“Our plan to maintain a sustainable and progressive dividend for our shareholders remains intact,” Nasser said.

‘Still a strong financial position’

This quarter’s result “is still a strong financial position. Yes, it’s not as astonishing as the results that we saw last year – but this is aligned with the overall industry trend,” Carole Nakhle, CEO of Crystol Energy, told CNBC’s “Capital Connection” on Monday. 

The net income figure was a 38% decline from the previous year’s second-quarter earnings, which had hit a jaw-dropping net income of $48.4 billion. At the time, the second-quarter 2022 result was up 90% on the year, on the back of the energy price surge triggered by Russia’s war in Ukraine.  

The recent drop in profitability was in line with industry trends. British oil giant BP reported a nearly 70% year-on-year decline in second-quarter profit last Tuesday, while Exxon Mobil, Shell and French oil major TotalEnergies also reported steep falls in earnings as weaker oil prices filter through the sector. 

“At Aramco you also have to factor in the decline in production,” Nakhle said.  

Saudi Arabia announced a 1 million barrel per day production cut in June, coming into effect in July — which has since been extended across both this and next month. The decline “can be extended or extended and deepened” beyond September, according to the Saudi Press Agency.

The cut adds to 1.66 million barrels per day of declines that some members of OPEC and its allies are putting in place until the end of 2024. 

“It has definitely put an upward pressure on prices,” Nakhle said. “Those announced cuts are helping OPEC+ in achieving its long-promoted mantra of achieving market stability,” she said, calling $80 a “highly desirable” price floor for Saudi Arabia.  

Oil prices are expected to increase through the third and fourth quarters. Top forecaster Goldman Sachs expects Brent prices to top $86 a barrel by December and $93 per barrel by next year, as strong demand and OPEC+ supply deficits tighten markets.