Saudi Aramco Stock Tanks Amid Debt, Low Oil Prices and Poor Performance

Saudi Aramco's stock has underperformed peers since its 2019 IPO, with a total return of just 16%. The company is now taking on debt to cover its dividend, and its shares have fallen to a five-year low. Despite being the world's lowest cost oil producer, Aramco couldn't cover its dividend even with Brent averaging over $70 a barrel. The Saudi state owns 97% of the stock and is the biggest beneficiary of the dividends.

Saudi Aramco's stock has underperformed its peers since its 2019 Initial Public Offering (IPO), with a total return of just 16% [1]. The company is now taking on debt to cover its dividend, and its shares have fallen to a five-year low. Despite being the world's lowest cost oil producer, Aramco couldn't cover its dividend even with Brent averaging over $70 a barrel [1]. The Saudi state owns 97% of the stock and is the biggest beneficiary of the dividends.

Aramco's stock has consistently underperformed compared to its peers. Over the last five and a half years, Aramco has delivered a paltry 16% return, including re-invested dividends, while companies like Exxon Mobil Corp., Chevron Corp., and Shell Plc have all delivered total returns of more than 50% [1]. The company's free cash flow of $34.4 billion in the first six months of 2025 was insufficient to cover the $42.7 billion dividend during the same period [1]. To bridge this gap, Aramco sold bonds, a move it can do with ease due to its low leverage ratio.

The Saudi state's ownership of 97% of Aramco's stock means it is the primary beneficiary of the dividends. However, the company's financial performance has raised concerns among investors. Aramco's share price has fallen to its lowest level since March 2020, when the COVID-19 pandemic sent Brent crude close to $20 per barrel [1]. The company's headcount has increased from about 65,000 employees a decade ago to about 75,000 today, while its spending on new projects remains high [1].

Aramco's valuation has been a significant issue since the Saudi Crown Prince Mohammed bin Salman insisted the company was worth $2 trillion in 2016 [1]. While its market cap peaked at $2.42 trillion as oil prices spiked shortly after Russia invaded Ukraine, it is now about $1.5 trillion, a quarter smaller than the original valuation [1]. The investors who participated in the 2024 secondary public offering bought at 27.5 riyals a share and are now nursing paper losses of more than 12% [1].

The Saudi Public Investment Fund (PIF) has also faced financial challenges. The fund saw an $8 billion write-down in its gigaproject investments, including the futuristic $500 billion Neom development, at the end of 2024 [2]. This write-down came amid lower global oil prices and a growing fiscal deficit for the Saudi kingdom. The PIF's assets under management climbed 19% from the end of 2023 to $913 billion, but its gigaproject investments declined by 12.4% to $56.2 billion [2].

Aramco's latest move is a lease-and-leaseback deal for its Jafurah gas processing assets, valued at $11 billion [3]. The deal is led by funds managed by Global Infrastructure Partners (GIP), a part of New York-based global investment management corporation BlackRock. This deal marks a significant inflow of foreign direct investment into the Kingdom's energy sector.

In conclusion, Saudi Aramco's stock performance has been lackluster since its IPO, and the company is facing financial challenges. The Saudi state's significant ownership of Aramco's stock means it is the primary beneficiary of the dividends, but the company's financial performance has raised concerns among investors. The Saudi Public Investment Fund has also faced financial challenges, with an $8 billion write-down in its gigaproject investments. Aramco's latest move is a lease-and-leaseback deal for its Jafurah gas processing assets, valued at $11 billion.

References:
[1] https://www.bloomberg.com/opinion/articles/2025-08-18/saudi-aramco-gets-wall-street-s-thumbs-down-again
[2] https://www.cnbc.com/2025/08/14/saudi-arabia-pif-fund-sees-8-billion-writedown-in-megaprojects.html
[3] https://news.az/news/saudi-aramco-signs-11-bln-usd-lease-and-leaseback-deal-for-jafurah-gas-assets