Saudi Aramco profits hit new high in bumper oil market

Saudi Aramco posted the biggest quarterly adjusted profit of any listed company in the world, thanks to strong crude prices and production.

Aramco followed big oil rivals reporting an increase in profits. Net profit rose to $48.4 billion in the second quarter from $25.5 billion a year earlier, the state-controlled company said on Sunday. The profit exceeded an analyst estimate compiled by the company of $46.2 billion. Revenue soared 80% to $150 billion, beating analysts’ estimates. Its free cash flow increased 53% from a year earlier to $34.6 billion.

Aramco “expects oil demand to continue growing for the remainder of the decade, despite downward economic pressures on near-term global forecasts,” Chief Executive Amin Nasser said.

The company is using the windfall to reduce its debt and invest in a huge expansion of its production capacity, rather than increasing payments to shareholders.

The Saudi state-controlled company kept its quarterly dividend, a crucial source of revenue for the kingdom, unchanged at $18.8 billion. This was unlike most Western majors, which increased payouts to shareholders. Aramco also reduced leverage, a debt-to-equity measure, to 7.9% from 14.2% at the end of 2021.

Energy companies exploded in the first half of this year. Russia’s invasion of Ukraine has rattled markets, driving oil prices above $100 a barrel and pushing up refining margins, while Aramco benefits from both production prices and high sales. Demand, meanwhile, has continued to rebound from the coronavirus pandemic in most parts of the world. Companies like Exxon Mobil Corp. and Shell Plc made record profits in the second quarter.

The quarter could mark a high point for Aramco. While Brent crude averaged $112 a barrel between April and June, it has since fallen below $95 as the US and European economies slow and due to Covid lockdowns in China.

Yet Saudi Arabia is ramping up production with other members of OPEC+, the producer cartel it leads alongside Russia. The kingdom pumped 10.5 million barrels of crude per day in the second quarter. It increased that figure to nearly 11 million in July and is under pressure from the United States and other major importers to go even higher, although some analysts doubt it has much spare capacity.

Aramco said it “continues to work to increase maximum sustainable crude oil capacity from 12 million barrels per day to 13 million by 2027.”

Aramco is listed in Riyadh in 2019, although it is still 98% state-owned. Its shares have gained 25% this year, giving it a market valuation of $2.4 trillion.

The company is expected to release a more detailed breakdown of its results on Monday, including the performance of its upstream and downstream units.

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