Aramco followed big oil rivals reporting a surge in profits. Net income rose to $48.4 billion in the second quarter, up from $25.5 billion a year earlier, the state-controlled company said on Sunday. Profit beat a company compiled analyst estimate of $46.2 billion. Revenue climbed 80 per cent to $150 billion, beating analyst estimates. Its free cash flow rose by 53 per cent from a year earlier to $34.6 billion.
Aramco “expects oil demand to continue to grow for the rest of the decade, despite downward economic pressures on short-term global forecasts” Chief Executive Officer Amin Nasser said.
The company is using the windfall to reduce debt and invest in a huge expansion of its production capacity, rather than boost payouts to shareholders.
The Saudi Arabian state-controlled company kept its quarterly dividend, a crucial source of revenue for the kingdom, unchanged at $18.8 billion. That was unlike most Western majors, who increased payouts to shareholders. Aramco also reduced gearing, a measure of debt to equity, to 7.9 per cent from 14.2 per cent at the end of 2021.
Energy companies boomed in the first half of this year. Russia’s invasion of Ukraine roiled markets, sending oil prices above $100 a barrel and causing refining margins to soar, while Aramco is benefiting from both high production and sales prices. Demand, meanwhile, continued to rebound from the coronavirus pandemic in most parts of the world. Firms such as Exxon Mobil Corp. and Shell Plc made record earnings in the second quarter.
The quarter may mark a high point for Aramco. While Brent crude averaged $112 a barrel between April and June, it’s since fallen below $95 as the US and European economies slow and due to China’s Covid lockdowns.
Still, Saudi Arabia is ramping up output along with other members of OPEC+, the producers’ cartel it leads alongside Russia. The kingdom pumped 10.5 million barrels a day of crude in the second quarter. It increased that figure to almost 11 million in July and is under pressure from the US and other major importers to go even higher, despite some analysts doubting it has much spare capacity.
Aramco said it “continues to work on increasing crude oil maximum sustainable capacity from 12 million barrels per day to 13 million by 2027.”
Aramco listed in Riyadh in 2019, though it’s still 98 per cent state owned. Its shares have gained 25 per cent this year, giving it a market valuation of $2.4 trillion.
The company is scheduled to release a more detailed breakdown of its results, including the performance of its upstream and downstream units, on Monday.