Aramco No Longer Commands Premium After Stock Decline

By Staff, Agencies

Saudi Aramco, long the world’s largest oil company, is underperforming its industry peers, with shares down 14% this year—its weakest showing since the pandemic, according to Bloomberg.

While Western oil giants have seen a recovery, Aramco's stock has slipped below both its 2024 secondary offering price and the broader Saudi market index.

Analysts point to concerns over a potential dividend cut, looming global oil surplus, and weaker long-term growth as key factors.

“The market may be resetting valuations lower to align with other national oil companies,” said Morningstar strategist Allen Good.

Aramco has lost over $800 billion in market value since its 2022 peak of nearly $2.4 trillion.

With the Saudi government and its sovereign wealth fund holding 98% of the company, the slump raises questions about future share sales that are vital to funding the kingdom’s economic diversification.

Despite the drop, Aramco remains the most valuable oil firm globally with a $1.55 trillion valuation and the industry’s top dividend payer

However, payouts are expected to fall from $124 billion in 2023 to around $85 billion in 2024.

Second-quarter net income is projected to decline 20% year-on-year to $24 billion.

While rivals like ExxonMobil and Shell expand output, Aramco’s production remains below its 12 million barrels per day capacity.

Saudi Arabia plans to raise output to 10 million barrels by September, and Aramco is eyeing additional cash flow by replacing domestic crude use with gas and renewables.

Meanwhile, oil prices remain below the IMF’s estimated $92-per-barrel breakeven price for Saudi Arabia, heightening fiscal pressure and the likelihood of more government stake sales.

With only 2% of shares publicly traded, Aramco’s limited float and the risk of further government sales continue to weigh on investor sentiment.

“The threat of dilution is a major overhang,” said Varun Laijawalla of Ninety One in London, warning that share performance may suffer regardless of oil price trends.