Impact of Geopolitical Worries and Economic Contraction
Oil prices swung wildly in 2022, climbing on geopolitical worries amid the war in Ukraine, then sliding on weaker demand from top importer China and worries of a global economic contraction. In the results statement, Aramco's CEO Amin Nasser said, "Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real — including contributing to higher energy prices."
Investment in Lower-Carbon Technologies
To address these challenges, the company is investing in new lower-carbon technologies with the potential to achieve additional emission reductions. Plans to up crude production capacity to 13 million barrels per day (bpd) by 2027 are on track, the statement said.
Capital Expenditure and Dividends
Aramco's capital expenditure rose 18% to $37.6 billion in 2022, and the company said it expects this year's spending to be around $45.0 billion to $55.0 billion, including external investments. Aramco declared a dividend of $19.5 billion for the fourth quarter, an increase of 4% from the previous quarter. Its board also recommended issuing bonus shares, with eligible shareholders receiving one share for every ten shares owned.
Record Free Cash Flow
Free cash flow reached a record of $148.5 billion in 2022, compared to $107.5 billion in 2021. Prices surged in March last year as Russia's invasion of Ukraine upended global crude flows, with international benchmark Brent reaching $139.13 a barrel, the highest since 2008. Prices cooled rapidly in the second half of 2022 as central banks hiked interest rates and fanned recession worries.
OPEC+ Producer Alliance Cut Output
The OPEC+ producer alliance, led by Saudi Arabia, agreed last year to cut output by 2 million bpd from November until the end of 2023 to support the market. The decision drew heavy criticism from the United States and other Western countries, but market dynamics since then have shown the cuts to be prudent, with oil prices hovering near $80 a barrel from highs above $100 in 2022.