Increasing production offsets weak oil prices, Saudi Aramco achieves profit growth in Q3

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Saudi Aramco’s latest third-quarter results show that the company successfully offset the pressure from weak crude oil prices by increasing production, achieving profit growth against the trend and surpassing analysts’ expectations in earnings.

The world’s largest oil exporter released its financial report on Tuesday, revealing an adjusted net profit of 104.92 billion riyals (about $28 billion) for the third quarter, a 0.9% increase year-on-year, beating estimates compiled by Bloomberg and LSEG. This performance offers some relief to Saudi Aramco, which has faced profit pressures from declining oil prices in recent years.

Saudi Aramco CEO Amin Nasser stated in a press release, “We increased production at the lowest incremental cost and reliably supplied customers with the oil, gas, and related products they depend on, which drove strong financial performance and quarterly profit growth.”

This positive result was achieved against a backdrop of persistently low oil prices. According to FactSet, since the start of this year, international benchmark Brent crude has fallen more than 12%, currently standing at around $65 a barrel. This is well below the over $90 level estimated by the International Monetary Fund (IMF) as necessary for Saudi Arabia to balance its national budget, leading to cutbacks in some of the country’s major infrastructure and tourism projects.

Profits Exceed Expectations, Cash Flow Remains Strong

Details in the financial report show that several key indicators for Saudi Aramco performed strongly in the third quarter. Total revenue reached 418.16 billion riyals, and adjusted net profit was 104.92 billion riyals, both exceeding market expectations.

In terms of profitability, operating profit was 193.52 billion riyals. Of greater interest to investors, free cash flow—a measure of financial health—rose to $23.6 billion this quarter, surpassing what’s needed for dividend payments. Meanwhile, the company’s gearing ratio dropped slightly from 6.5% last quarter to 6.3% as of September 30, signaling improving financial conditions. These figures show that despite a challenging market environment, Saudi Aramco’s profitability and cash position remain solid.

Increased Output Offsets Price Decline

The core driver of Saudi Aramco’s profit growth this time was its increase in output. As part of OPEC+ policy, this Saudi state oil giant has been boosting production, effectively offsetting the negative impact of falling crude prices. Since April this year, OPEC+ has collectively lifted its production target by about 2.9 million barrels per day.

Amin Nasser’s remarks confirmed the company’s production increase strategy. As the backbone of the Saudi economy, Aramco’s oil revenues and high dividend payouts are critical to supporting the kingdom’s multi-trillion-dollar economic transformation plans. Amid weak oil prices, maintaining stable income streams by ramping up output has become a key measure for the company.

OPEC+ Cautious Output Hikes and Market Outlook

Although Saudi Aramco has benefited from increased production, the production strategy of the entire OPEC+ alliance faces a more complex outlook. Last weekend, OPEC+ announced a modest production increase of just 137,000 barrels per day in December, and decided to pause further hikes in the first quarter of next year to address possible supply gluts.

Moreover, geopolitical factors have brought new uncertainties to OPEC+ strategy. Reports say that the Western countries’ new sanctions on key OPEC+ member Russia have complicated the alliance’s production plans. After the US imposed extra restrictions on Russian oil giants Rosneft and Lukoil, Moscow has faced constraints in boosting output.

Low Oil Prices: Challenges and Long-Term Strategic Investment

The ongoing low oil price environment remains a major challenge for both Saudi Aramco and the Saudi government. In response, Aramco has slowed expansion plans for some domestic refining and chemical projects, shifting its focus to large-scale natural gas development projects instead.

According to Reuters, the company recently spent $701.8 million to acquire a 22.5% stake in Petro Rabigh from Japan’s Sumitomo Chemical, bringing its total holding to around 60%. In addition, the oil giant has recently acquired a minority stake in artificial intelligence company HUMAIN, demonstrating its intention to diversify investments beyond its core business.

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