Saudi Aramco’s financial results for 2023 once again demonstrate the strength of the company and its importance to Saudi Arabia. Despite lower oil prices and production levels, Aramco’s net income was $121 billion in 2023. While this was down 25% from the exceptional $161 billion achieved in 2022, it still represents a very strong performance. Four things from the report are particularly noteworthy:

• Dividend payments increased substantially. Dividends paid by the company increased by 30% in 2023 to $98 billion. This followed the decision to pay additional “performance-linked” dividends on top of the base dividend from the third quarter of 2023. The dividend payout is set to increase further to $124 billion in 2024. Higher dividends particularly benefit Aramco’s two largest shareholders, the Saudi government and the Public Investment Fund.

Source: Aramco. 2024 projection for capital spending is the midrange of guidance given by Aramco.

• The company is boosting capital spending. Capital spending increased by 28% in 2023 to nearly $50 billion as the company increased its investment in upstream, downstream, and new energy sources domestically and overseas. Aramco also gave guidance that its capital spending would be in the $48 billion to $58 billion range in 2024. It is estimated that the directive from the government to delay the previously announced oil capacity expansion will save the company around $40 billion in additional capital spending during 2024-28.

• Borrowing declined. The company made the final payments to the PIF for its 2020 acquisition of the Saudi Basic Industries Corporation during 2023. This reduced outstanding borrowing by 26% to around $77 billion.

Cash and liquid asset holdings declined. These holdings fell to around $100 billion from $135 billion in 2022 as higher dividend payments and capital spending as well as the repayment of loans more than absorbed the cashflow generated by operating activities during the year. Aramco, however, remains a significant source of liquidity in the Saudi economy. For comparison, the assets in the PIF’s Treasury pool (a proxy for its liquidity) stood at about $22 billion in September 2023, while the government’s deposits at the central bank were $116 billion at the end of 2023.