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Saudi Aramco (TADAWUL:2222), the world’s largest oil company, announced on Tuesday that it expects to declare $85.4 billion in total dividends in 2025, a notable decrease from the $124.25 billion distributed in 2024.
Financial Performance: Declining Profitability in 2024
The oil giant reported a 12.4% drop in full-year 2024 net income, which fell to $106.2 billion from $121.3 billion in 2023. The decline reflects lower oil prices and higher capital expenditures amid ongoing global economic uncertainties.
Other key financial metrics also weakened:
- Cash flow from operations dropped to $135.7 billion (from $143.4 billion in 2023).
- Free cash flow fell to $85.3 billion (from $101.2 billion in 2023).
- Gearing ratio (debt-to-equity) rose to 4.5% at the end of 2024, compared to -6.3% a year earlier, indicating a shift from a net cash position to higher leverage.
Dividend & Capital Expenditure Strategy
Despite lower overall dividends for 2025, Aramco’s board declared a Q4 base dividend of $21.1 billion, marking a 4.2% year-over-year increase. Additionally, the company approved a performance-linked dividend of $0.2 billion, both set to be paid in Q1 2025.
Aramco’s capital investment for 2024 totaled $53.3 billion, with $50.4 billion allocated to organic capital expenditure. The company provided 2025 capital investment guidance of $52.0 billion to $58.0 billion, excluding $4.0 billion in project financing.
Oil Market Outlook & Spare Capacity Utilization
Aramco noted that global oil demand reached new highs in 2024 and expects further growth in 2025. The company emphasized its ability to utilize one million barrels per day (bpd) of existing spare capacity, which could generate an additional $12.0 billion in operating cash flow, assuming 2024’s average oil prices.
Conclusion: Navigating Market Volatility
While Aramco remains a financial powerhouse, the company faces lower profitability, reduced free cash flow, and rising debt levels. However, its strong dividend payouts, strategic capital investments, and ability to leverage spare capacity suggest it remains well-positioned to navigate oil market volatility in 2025.
