Saudi Aramco’s first-quarter profits fell due to declining oil prices, which put pressure on the finances of the world’s largest oil exporter. The state-owned company reported a 4.6% drop in net income, reaching 97.5 billion riyals ($26 billion). Despite a reduction in total dividends, the company’s free cash flow still failed to cover the dividends. Operating profits declined by 5.3%, surpassing analyst expectations compiled by Bloomberg.
This decline underscores the ongoing strain on Saudi Aramco’s balance sheet. Earlier this year, the company decided to cut its dividend for 2025 by about one-third to $85 billion, which eases some pressure on the company but reduces a critical source of income for the Saudi government, which is also facing increasing financial stress.
Although oil production increased, the drop in prices since April could further impact both Saudi Aramco and the Saudi government. Over the past five weeks, Riyadh, leading the OPEC+ alliance, twice exceeded its production targets, while U.S. trade wars under former President Donald Trump led to a four-year low of oil prices below $60 per barrel in London.
The company’s total dividend this quarter decreased to $21.36 billion, down from $31 billion a year earlier, primarily due to a significant reduction in performance-linked payouts following the strong profits in 2022.
Crown Prince Mohammed bin Salman has spent billions modernizing the country’s economy, and lower dividends will increase the pressure on Saudi Arabia’s budget. His plans include building a new city, Neom, in the desert and boosting investments in sports, all of which contribute to the country’s expanding deficit and record-high debt levels in the first quarter. The Saudi government and its wealth fund together hold more than 97% of Saudi Aramco’s shares.
Brent crude prices are currently near $64 per barrel, far below the $92 per barrel level estimated by the IMF as necessary for Saudi Arabia to balance its budget. The average price for Saudi Aramco’s crude oil in Q1 was $76.30 per barrel, down from $83 per barrel during the same period last year.
President Trump is expected to arrive in Riyadh on Tuesday for a visit to the Middle East, followed by trips to Qatar and the UAE. He has called for increased oil production by OPEC+ to lower prices and curb inflation, while also pressuring Russia over the Ukraine conflict.
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