The oil giant’s profits fell 19% in the first quarter

DUBAI, United Arab Emirates — Saudi oil giant Aramco on Tuesday reported a 19% fall in first-quarter profit, recording net income of $31.9 billion, down from $39.5 billion a year earlier, amid slumping oil prices.

Analysts had expected to see net profit fall this quarter compared to a year earlier, as inflation and rising interest rates squeeze global demand and fuel fears of a recession. However, Aramco’s net income exceeded expectations of $30.5 billion by analysts polled by Reuters.

The company’s net profit rose 3.75% from the fourth quarter. She said the result of the weak earnings was offset by lower taxes and higher financing and other income. The shares rose 3.2 percent in early trading in Riyadh on Tuesday.

The company said Aramco’s first-quarter dividend, which increased in the fourth quarter to $19.5 billion, will be paid in the second quarter. It reported quarterly cash flow from operating activities at $39.6 billion and free cash flow at $30.9 billion, both of which were up slightly from the prior year.

Aramco, the world’s largest oil exporter, also revealed on Tuesday that it will start paying a performance-related dividend in addition to the $19.5 billion, and will target between 50% and 70% of its free cash flow figure. She said the dividend will be paid quarterly and at the sole discretion of the company’s board of directors, depending on how the company is performing.

Aramco CEO Amin Nasser emphasized the value of its refining and petrochemicals strategy, which has seen it invest heavily in petrochemicals and other processes.

“We are taking advantage of the latest technologies to increase the capacity of converting liquids to chemicals and meet the expected demand for petrochemical products,” Al-Nasser said.

Al-Nasser stressed the continued importance of hydrocarbons to the world’s energy needs, adding, “We believe that oil and gas will remain critical components of the global energy mix for the foreseeable future.”

He said the company is “moving forward” in expanding its production capacity, and that its “long-term outlook has not changed.”

Aramco reported record net income of $161.1 billion for 2022 in March, up 46.5% over the year.

Saudi Basic Industries Corporation (SABIC), one of the world’s largest petrochemical companies and 70% owned by Aramco, this month. Saw its first-quarter net profit drop 90% He warned that margins would remain under pressure amid new capacity, higher interest rates and uncertainty about global growth.

Oil and gas prices rose at the start of 2022, as Western sanctions on Russia after its all-out invasion of Ukraine steadily restricted access to crude supplies. But this year, so far, tells a different story about pricing.

The international benchmark Brent crude oil price is down 9% year-on-year, and down more than 17% year-on-year. This fall stems from a host of economic concerns.

Earlier this month, the US Federal Reserve raised interest rates by a quarter of a percentage point, sparking investor concerns that slowing economic growth could dampen energy demand.

Pressure from anti-inflationary measures by both the US Federal Reserve and the European Central Bank [European Central Bank]has led to weak demand growth for most OECD countries, with recessionary risks ahead,” Ed Morse, head of global commodities research at Citi, wrote in a note this week.

— CNBC’s Lee Ying Shan contributed to this report.