Dividends and Saudi Aramco records historic profit in 2022

When the average person on the street thinks about oil companies, they tend to think of the remains of Standard Oil. The public companies tend to the companies drilling for oil and they are ExxonMobil, Chevron, BP, Shell,Eni and TotalEnergies. Exxon and Chevron are US based, the other companies are based in Europe. The reason people tend to think of these companies is they own gasoline stations where people fuel up their vehicles. When people tend to think about big oil they generally refer to the upstream operations of drilling for oil and sending the oil down pipelines to a refinery. The downsteam operations is all the products which come from the refinery including gasoline. However, there is a bigger company in the oil business and it owns the oil in Saudi Arabia, the company is called Saudi Aramco.

In an article by Jon Gambrell of the Assoicated Press, the company reported $161 billion profit. In the last 3 years profits have gone from $49 billion to $ 110 billion to this year’s $161 billion.

Saudi Aramco put its production at 11.5 million barrels of oil a day in 2022, it hopes to raise levels to 13 million barrels per day in 2023. To increase output, the capital budget will be $5 billion.

Saudi Aramco declared a dividend of $19.5 billion to be paid in the 1st quarter of the year. Most of the profits will go to the government of Saudi Arabia which owns 98% of the shares.

The oil in Saudi Arabia is still some of the least expensive to drill and pump out which translates to big profits when the price of oil soared from an $82 per barrel to $120 per barrel. The price in mid March is around $80 per barrel.

Crown Prince Mohammed bid Salman has plans and the financial resources to built infrastructure to help diversify the economy and this is where the profits are allocated to.

Linking to dividend paying stocks, if you own a commodity based company such as oil companies which the past couple of years have made very good profits, the key is always what is the difference between removing the mineral from the earth and selling it. As long as the price of the underlying commodity is above that number, you can own it for as long as you desire. If the price drops, then it time to seek alternatives.

There are more questions than answers, till the next time – to raising questions.


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