Aramco Profit Falls for 10th Straight Quarter

Saudi Aramco reported a decline in profit for a 10th straight quarter as lower oil prices outweighed the impact of higher production.

Net income attributable to shareholders dropped 19% to a four-year low of 85.63 billion riyals ($22.8 billion) in the second quarter from a year earlier, according to a statement. That missed analysts estimates compiled by Bloomberg. Free cash flow again failed to cover the dividend and debt rose.

The numbers are the latest sign of pressure on Aramco’s balance sheet. Earlier this year, the company said it would lower its dividend for 2025 by a third to about $85 billion, but it’s still struggling to churn out enough cash to cover the distribution. The smaller payout and weaker oil are cutting into Saudi government revenues just as Crown Prince Mohammed bin Salman pushes ahead with ambitious plans to transform the economy.

Oil prices in London were on average almost $20 a barrel lower in the second quarter compared with a year earlier. Brent crude traded near $68 a barrel on Tuesday, below the more-than $90 that the International Monetary Fund says the Saudi government needs to balance its budget.

The company’s total dividend for the quarter was $21.36 billion, almost unchanged from the first quarter but lower than the $31 billion a year earlier. That reduction is primarily because Aramco decided to vastly reduce the performance-linked component of the payout after completing the distribution of the bumper profits from 2022.

Free cash flow — the funds left over from operations after accounting for investments and expenses — fell 20% to $15.2 billion in the second quarter. That wasn’t enough to cover the dividend. Net debt rose to $30.8 billion from $24.7 billion at the end of the first quarter.

The higher borrowing drove up the gearing ratio to 6.5% from 5.3% three months ago. Still, that level is low compared with Western oil majors, with the ratio for Shell Plc at 19%.

Aramco will continue to be active in debt markets, Chief Financial Officer Ziad Al-Murshed told reporters on a conference call. The company is looking at types of debt instruments it hasn’t used before, like commercial paper or issuances in various currencies or locations, to attract different classes of investors, he said.

“The reliance on debt to pay the base dividend raises some concern,” said Allen Good, an analyst with Morningstar who has a hold rating on the stock. “Debt remains very low and they can increase leverage or reduce capex to support the dividend during a downturn in oil prices. Hence, the risk of a base dividend reduction is very low.”

The company maintained its capital expenditure targets of between $52 billion to $58 billion for this year. It’s looking for investors to buy into some infrastructure assets to free up capital for other investments, Al-Murshed said.

During the quarter, Aramco also reported an adjusted net income of $24.5 billion, 14% lower than a year earlier. It was the first time the company reported earnings on that basis, which it said strips out one-time or non-recurring items.

Raising Output

The company has been raising output in recent months as part of a plan by the Saudi Arabia-led Organization of the Petroleum Exporting Countries and its allies. By September, the country will be able to pump almost 10 million barrels a day, up a million barrels a day from April.

The additional supply is coming at a time when markets remain fragile. Higher OPEC+ production, a projected slowdown in China and swelling supplies across the Americas could contribute to a hefty surplus that the International Energy Agency sees at 2 million barrels per day in the fourth quarter.

Still, Aramco Chief Executive Officer Amin Nasser said he was confident oil consumption will grow. “Market fundamentals remain strong and we anticipate oil demand in the second half of 2025 to be more than 2 million barrels per day higher than the first half,” he said in the statement.

Concerns over the oil market have contributed to Aramco’s shares dropping 14% and underperforming Western oil majors this year. The shares were up 0.6% in Riyadh on Tuesday.

Exxon Mobil Corp. and Chevron Corp., the biggest US oil majors, beat analysts’ earnings expectation in the second quarter after production rose. In Europe, Shell Plc also topped forecasts while TotalEnergies SE missed.

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