With the market now in flux, the Saudi giant has provided its latest financial and operational update, looking back on Q1

WHAT: Aramco reported a drop in Q1 net income on the back of lower production and oil prices, but still hit $26bn.

WHY: The company will reduce dividend payments significantly, while ploughing more capital into projects throughout the value chain.

WHAT NEXT: Away from the upstream, M&A efforts have also continued at pace, with Aramco expanding in LNG, fuels, hydrogen and CCUS.

Saudi Aramco has reported a fall in first-quarter net income, reflecting ongoing turbulence within global energy markets and the impact of softer oil prices during the period, influenced by persistent economic uncertainties affecting demand.

Despite this environment, the state-controlled oil giant underscored its commitment to shareholder returns with an increased base dividend, even as it recalibrates its overall payout strategy for 2025 to align with national fiscal realities and invests heavily in long-term growth and capacity.

The Dhahran-based company announced on May 11 that its net income for the first quarter of 2025 was $26bn, down from $27.3bn recorded in the same period of 2024. Cash flow from operating activities also saw a decline to $31.7bn from $33.6bn year on year, while free cash flow, a key metric for dividend capacity, contracted more significantly to $19.2bn from $22.8bn.

Despite lower headline figures, Aramco’s board declared a Q1 base dividend of $21.1bn, a 4.2% increase y/y, alongside a performance-linked dividend distribution of $200mn, both payable in the second quarter. This commitment comes alongside a substantial planned reduction in the total dividend for 2025, forecast at approximately $85bn, down from $124bn distributed in 2024.

This adjustment reflects Aramco’s balance between commercial priorities and its role in Saudi Arabia’s economic planning, seen as crucial for helping ease the Kingdom’s budget deficit. This is particularly relevant, as Brent crude averages have remained below $77 per barrel this year, significantly under the estimated $90 per barrel fiscal breakeven point for the Kingdom.

Amin Nasser, Aramco president and CEO, was quoted in a company press release, as saying that “global trade dynamics affected energy markets in the first quarter of 2025, with economic uncertainty impacting oil prices.” He nonetheless noted the company’s “robust financial performance,” attributing it to Aramco’s “unique scale, its operational reliability and flexibility, the inherent value of its low-cost production base and its sustained emphasis on efficiency and the deployment of advanced technology.”

Nasser added that such volatile market periods “highlight the importance of disciplined capital planning and execution while we continue to take a long-term strategic view on market evolution and energy demand.”

Financials

The company’s 2024 full-year results, posted in March, had already shown market pressures, with net income of $105bn and free cash flow around $85bn falling short of its total dividend payout for that year, attributed mainly to lower oil prices and reduced production levels aligning with OPEC+ agreements.

Correspondingly, total hydrocarbon production in Q1 2025 was 12.4mn barrels of oil equivalent per day (boepd), a reduction from the previous year.

Aramco announced substantial capital expenditures totalling $12.5bn during the first quarter, reinforcing its commitment to investing through the cycle for long-term strategic growth. This significant investment underscores this commitment, even as it contributes to the recent shift towards a net debt position. Executing these large-scale projects successfully is vital for future revenue.

Funding includes ongoing work on major crude increment projects: procurement and construction advanced for the Marjan (adding 300,000 barrel per day capacity) and Berri (adding 250,000 bpd capacity) increments, both expected online during 2025.

Operational update

Engineering, procurement and construction (EPC) activities progressed for the Zuluf increment, set to process 600,000 bpd through a central facility starting in 2026. Work also continued on the Dammam development project, targeting an initial 25,000 bpd in 2025 and an additional 50,000 bpd by 2027.

These initiatives are strategically designed to maintain its maximum sustainable capacity (MSC) at 12mn bpd by offsetting natural reservoir declines, following the government’s directive last year to halt plans to increase MSC to 13mn bpd.

Significant investment capital is also directed towards strategically expanding gas production capacity, aiming for an increase of over 60% compared to 2021 levels. This gas expansion serves multiple goals, including meeting rising domestic energy and feedstock demand, freeing up crude oil for export, and establishing a larger presence in the global LNG market.

Key developments include advancing construction and procurement for the Tanajib Gas Plant (part of the Marjan programme, adding 2.6bn cubic feet (73.6mn cubic metres) per day processing capacity from 2025) and the Jafurah Gas Plant (phase one production expected in 2025, targeting 2 bcf (56.6 mcm) of sales gas by 2030 from the unconventional field). EPC activities also progressed for the Fadhili Gas Plant expansion, expected to add 1.5 bcf (42.5 mcm) per day of processing capacity by 2027.

Furthering its global LNG strategy, Aramco signed a definitive 20-year supply agreement in April with US developer NextDecade for 1.2mn tonnes per year (tpy) of LNG from its Rio Grande facility in Texas, contingent on a final investment decision (FID) for Train 4.

The high dividend payouts, particularly in 2024 exceeding free cash flow, have had an impact on Aramco’s finances, contributing to the company shifting into a net debt position recently. This contrasts with the net cash position exceeding $27bn held just over a year ago, highlighting the financial juggling act between high shareholder returns and massive capital investments in a moderate oil price environment.

In a positive development underscoring resource potential, Aramco announced major conventional and unconventional oil and gas discoveries in April, located in the Eastern Province and the Empty Quarter. Energy Minister Prince Abdulaziz bin Salman stated these finds would enhance reserves and solidify the Kingdom’s leading global energy position.

Beyond traditional upstream activities, Aramco is actively advancing its downstream and new energies portfolio, pursuing a strategy towards becoming a more integrated energy and chemicals company resilient across different value chains while addressing the energy transition. Recent milestones include definitive agreements for a 25% equity stake in Unioil Petroleum Philippines, the completed acquisition of a 50% equity interest in Blue Hydrogen Industrial Gases Co., and the launch of a CO2 Direct Air Capture (DAC) pilot plant, signalling commitment to exploring lower-carbon solutions.