Aramco stays focused on oil despite 17% drop in stock

Despite facing a 17 per cent drop in its stock price over the past year, Saudi Aramco remains committed to its core oil business, even as it explores non-oil ventures like EV manufacturer Lucid Motors. The company’s dedication to its traditional sector is evident in its ongoing investments in new oil and gas discoveries, supported by its ability to maintain the lowest production costs in the industry.

Aramco's recent production cuts have led to a 17 per cent drop in its stock price this year, while rivals like Exxon and Shell have seen their shares rise, Caliber.Az reports citing the local media.

Despite these short-term struggles, Aramco is poised to be a major player in the oil industry for years to come.

Bloomberg highlights that Aramco's performance contrasts sharply with that of Exxon and Shell, which have benefited from rising oil prices driven in part by Aramco's output restrictions. Unlike its Western counterparts, Aramco remains under majority Saudi state ownership, which influences its corporate strategy and production decisions.

While Aramco's stock may not be favored by investors at present, the company recently completed a secondary share offering that exceeded expectations, attracting substantial interest from non-Saudi investors.

Hasnain Malik of Tellimer notes that while Aramco's near-term growth is constrained by OPEC+ production limits, its strong dividend yield and position as a long-term player in the oil market offer a promising outlook as the industry transitions to renewables.

Aramco remains steadfast in its commitment to its core oil business despite diversifying into ventures like EV maker Lucid Motors. The company continues to invest in its traditional sector, recently announcing significant new oil and gas discoveries that it plans to develop despite ongoing production cuts.

The company's advantage lies in its ability to maintain the world's lowest production costs, which support profitability even when global oil prices fluctuate. These low costs also translate into lower emissions, an increasingly important factor for some oil importers concerned with the ethical sourcing of their crude.

Aramco's stock has experienced a 17 per cent decline over the past year, mirroring the 10 per cent drop in oil prices. This downturn is partly attributed to the Saudi state’s majority ownership, which influences the company's decisions and pressures it to deliver substantial dividends. The Saudi government has driven production cuts and halted a planned capacity expansion to support its broader economic diversification goals, as outlined by Crown Prince Mohammed bin Salman.

Despite the stock's decline, Aramco continues to pay dividends and has allocated a budget of $48 to $58 billion for ongoing exploration and development. This financial commitment underscores its strategic focus on maintaining a leading position in the oil industry while adapting to a changing global energy landscape.