Saudi Aramco Keeps World’s Biggest Dividend as Debt Jumps

Saudi Arabia’s oil giant Aramco kept up its $31 billion dividend to help feed state coffers, despite rising debt.

The company, majority owned by the Saudi state, is maintaining the world’s biggest payout even with increasing signs of stress on the balance sheet. The outlook for oil has darkened with concerns over demand, but the dividend is key for the government’s finances.

The test for how long the payout can be maintained will likely come early next year, when a special component that amounts to about $10 billion a quarter is scheduled to start shrinking. Aramco is already paying out more than it’s earning as Saudi Arabia’s ambitious economic transformation plans widen the government’s budget deficit. It’s pushed the company into a net debt position for the first time in two years.

Aramco had net debt of $8.9 billion during the quarter, compared with net cash of $27.4 billion a year ago and $2.3 billion as of the end of June. Free cash flow — money from operations after capital expenditure — of $21.99 billion in the third quarter was lower than the total dividend.

Relying heavily on the payout

The payout is crucial for the Saudi budget as crude prices remain far below the levels the kingdom needs to balance spending. Crown Prince Mohammed Bin Salman is driving ahead with expensive ventures such as the futuristic project of Neom, but some plans — including Aramco’s own chemical plants — are being dialed back because of funding issues.

The company’s net income fell 15% to $27.6 billion in the quarter ended September compared with a year earlier, according to a statement Tuesday. Adjusted profit attributable to shareholders missed analysts estimates compiled by Bloomberg. 

It sold crude at an average of $79.30 a barrel in the third quarter, $10 less than what it got a year ago. Its output has also been held at about 9 million barrels a day for over a year as part of OPEC+’s efforts to revive the market. The group on Sunday further delayed a plan to gradually unwind the cutbacks, as crude prices continue to struggle amid a fragile economic outlook.   

Aramco’s shares fell as much as 0.7% in Riyadh. They’re down 17% this year, underperforming global oil majors such as Exxon Mobil Corp. and Shell Plc.

Aramco raised $6 billion of bonds in July in what was its first dollar-debt offering in three years. It sold another $3 billion in dollar-denominated Islamic bonds in September. The Saudi government and entities like its Public Investment Fund have issued around $50 billion in bonds in 2024, according to data compiled by Bloomberg, making it one of the biggest issuers of international debt in emerging markets this year.

Besides the dividend, the Saudi government has also leaned on Aramco this year to raise more than $12 billion in a secondary share sale.