Saudi Aramco’s annual profit more than doubles thanks to soaring oil prices

An employee looks at the Saudi Aramco oil facilities in Abqaiq, Saudi Arabia, October 12, 2019.

Maxim Chemetov | Reuters

Saudi oil giant Aramco reported a blistering annual profit on Sunday, posting net profit more than doubled year-on-year to $110 billion.

Aramco’s 2021 net profit rose 124% to $110 billion in 2021 from $49 billion in 2020, citing higher crude oil prices, stronger refining and chemical margins and the consolidation of its chemical activity, the annual results of SABIC.

The figures were in line with expectations, with analysts polled by Reuters forecasting net profit of $109.7 billion for the full year. Aramco shares on the Saudi Tadawul Exchange rose nearly 4% in Sunday trading after the result.

“Our strong results are a testament to our financial discipline, our flexibility in the face of changing market conditions, and our continued focus on our long-term growth strategy, which seeks growth in value for our shareholders,” said Aramco CEO Amin Nasser in the earnings release.

surging oil

Aramco has benefited from soaring oil prices in 2021, with international benchmark Brent crude topping $80 a barrel at the end of the year, up about 50% over the 12-month period. Supply shortages added to a complex series of factors leading to major uncertainty in the energy and commodities complex, even before Russia’s invasion of Ukraine.

“Although economic conditions have improved significantly, the outlook remains uncertain due to various macro-economic and geopolitical factors,” he added. It comes after the IEA warned the oil market was heading for its “biggest supply crisis in decades” as Russian sanctions hit and buyers shunned its exports.

“We are seeing healthy demand for oil. Unfortunately, global spare capacity is shrinking, combined with low inventories and a lack of investment,” Nasser said in an earnings call on Sunday. He also blamed “a totally unrealistic transition plan” on the current price dynamics.

The result and profit call also came just hours after Saudi authorities confirmed another attack on Aramco facilities on Sunday, with Houthi rebels using missiles and drones to target at least six sites across the country. Saudi Arabia, including an Aramco fuel depot and a liquefied natural gas plant.

“There were no injuries or fatalities, and no impact on the company’s supplies to customers,” Nasser said.

“We demonstrated our ability to respond quickly and effectively,” Nasser said, highlighting Aramco’s response to a major attack on its facilities in 2019. “We were able to restore operations quickly, while ensuring the reliability of the supply to our customers.

Special installment plan

Aramco also declared a fourth quarter dividend of $18.8 billion, to be paid in the first quarter of 2022. The dividend is covered by an increase in free cash flow to $107.5 billion in 2021, from 49.1 billion dollars in 2020.

Aramco said it would recommend that $4 billion in retained earnings be used to pay free shares to investors, subject to approval. According to the recommendation, shareholders would receive one free share for every 10 shares held. As a result, the total dividend for 2021 is $75 billion in cash plus bonus shares.

The earnings numbers stand in stark contrast to the company’s 2020 earnings, which saw a 44% drop from a year earlier due to the collapse in demand caused by the coronavirus pandemic.

Nasser then described Aramco’s 2020 fiscal year as one of its “toughest years” in recent history.

Increase capacity

The company also said it would invest to increase crude oil production capacity to 13 million barrels per day by 2027, expand its liquid-to-chemical production and seek to increase gas production by more than 50% by 2027. 2030.

Aramco has also stated that it aims to achieve net Scope 1 and Scope 2 greenhouse gas emissions across all of its wholly-owned assets by 2050. Scope 1 refers to direct emissions from from sources owned or controlled by the company, while scope 2 covers indirect emissions. of the production of purchased electricity consumed by the company.

“We are doing our part, but it is not enough. Other industry players also need to do their part and increase investment,” Nasser said, saying oil demand will continue to accelerate in the coming months. years to come.

Capital expenditure in 2021 was $31.9 billion, an 18% increase over 2020, primarily due to increased activity related to crude oil raises, gas plant of Tanajib and development drilling programs. Aramco expects capital spending in 2022 to be around $40 billion to $50 billion, with additional growth expected through the middle of the decade.

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