Saudi Arabian Oil Co (Aramco) followed its big oil competitors with bumper earnings, boosted by a recovery in oil and chemical prices.
The world’s biggest energy company made net income of 95.5 billion riyals (US$25.5 billion) in the second quarter, the highest level since the end of 2018. Free cash flow rose to US$22.6 billion, above the state-controlled firm’s quarterly dividend of US$18.8 billion for the first time since the start of the COVID-19 pandemic.
SURGE IN PRICES
Photo: AFP / HO / Aramco
The reopening of major economies has triggered a surge in commodity prices, with crude up about 40 percent this year.
In the past two weeks, oil companies such as BP PLC, Chevron Corp and Royal Dutch Shell PLC have said that they would increase share buybacks and payouts, confident the worst of the pandemic is over.
The results “reflect a strong rebound in worldwide energy demand and we are heading into the second half of 2021 more resilient and more flexible, as the global recovery gains momentum,” Aramco chief executive officer Amin Nasser said in a statement on Sunday. “I remain extremely positive about the second half of 2021 and beyond.”
Still, the pandemic is “clearly far from over,” Nasser said later on a call with reporters.
Oil just had its worst week since October last year as the spread of the Delta variant of SARS-CoV-2, especially in China, clouds the short-term outlook.
Global oil demand remains below pre-pandemic levels, but should reach a near-record high of 100 million barrels a day next year, Nasser said.
Aramco’s gearing, a measure of net debt to equity, fell to 19.4 percent from 23 percent at the end of last year, although it remains above management’s preferred cap of 15 percent. It declined thanks to higher cash flow and the Dhahran-based firm using some proceeds from the sale of a stake in its oil pipelines to pay down debt.
In June, Aramco completed the US$12.4 billion deal with a consortium led by US group EIG Global Energy Partners LLC.
Capital expenditure was US$15.7 billion in the first half of the year and Aramco expects it to be about US$35 billion for all of this year, in line with earlier guidance.
BOOSTING PRODUCTION
Part of that money would go toward boosting daily crude production capacity to 13 million barrels from 12 million.
“With less investment that we see from other producers globally, this creates an opportunity,” Nasser said.
Aramco is continuing to do due diligence on a proposed investment in Reliance Industries Ltd’s oil-to-chemicals refining business, chief financial officer Ziad al-Murshed said.
In 2019, Aramco discussed buying a 20 percent stake for about US$15 billion, but the deal was delayed by the pandemic.
It should be finalized this year, India’s Reliance said in June.
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