Proactive Investors - Subsiding fuel prices saw the world’s largest oil company Saudi Aramco (TADAWUL:2222) pen a near-40% drop in second-quarter profits on Monday.
Net income came in at US$30.08 billion for the second quarter, a 38% decline from the US$48.44 billion recorded during the same period to June last year.
Free cash flow sat at US$23.16 billion, meanwhile, down 33% on 2022’s figures.
Though the figures mark a drastic year-on-year decline, Saudi Aramco had been among the oil giants to enjoy hiked earnings as fuel prices spiked in the wake of the Ukraine war.
Chief executive Amin H Nasser described the results as showing the company's “resilience and ability to adapt through market cycles” as a result, with the profits dwarfing rivals’ thanks to its sheer size.
Faltering demand for oil on the back of a worsening economic outlook has weighed into prices so far this year, especially after the significant highs of 2022.
By today's prices, West Texas Intermediate and Brent crude have fallen 29% and 28% respectively from spikes in May and June last year.
However, Nasser reassured demand remained resilient looking ahead, with an anticipated recovery of the global economy, and the booming aviation sector in particular, set to have an impact.
Despite the faltering results, which echo a normalisation seen across the industry, Saudi Aramco announced a performance-based dividend would be introduced in the next quarter.
This follows a whopping US$19.5 billion awarded to shareholders in the second quarter – five times what Exxon Mobil Corporation (NYSE:XOM) issued in dividend payments during the same period.
So just how big is Saudi Aramco?
According to Fortune magazine, Saudi Aramco is the second-largest company in the world based on revenue, behind only Walmart (NYSE:WMT) – which generated US$572.75 billion last year.
Saudi Aramco towers over competitors, therefore, with its quarterly profits sitting 10 times higher than Shell (LON:RDSa)’s US$3.1 billion and over 16 times larger than BP PLC (LON:BP)’s US$1.8 billion.
For context, Saudi Aramco penned an average daily profit of US$330.6 million during the second quarter - even despite a 30% fall in mean oil prices to US$78.8 per barrel.
Based on market capital, Saudi Aramco is among just three companies to be valued at over two trillion dollars, with its worth trumped only by tech giants Apple Inc (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT).
Just three other companies are valued above the one trillion-dollar mark meanwhile – Google owner Alphabet (NASDAQ:GOOGL) and Amazon.com Inc (NASDAQ:AMZN), though chipmaker Nvidia Corporation has also yo-yoed around the milestone in recent months.
Based on Monday’s opening price, Saudi Aramco’s market capitalisation sat at US$2.27 trillion, with around 98% of the company’s shares estimated to be held by the government and the nation’s sovereign wealth fund.
Indeed, it is safe to say the company “is still [in] a strong financial position”, founder of consultancy Crystol Energy, Carole Nakhle, commented.
Given Saudi Arabia’s position as one the world’s largest producers of oil and subsequent efforts to boost prices by cutting production this year, these output cuts could well be key in the company’s subsiding profits, she added.
Shares rose 1% to 32.65 Saudi riyal on the update.