Aramco profits surge by a third as oil price rise boosts economy
‘Better days are coming’ says chief executive amid increased global energy demand
Saudi Aramco’s profits surged by nearly a third in the first three months of 2021 compared with the same period last year — and “better days are coming,” its chief executive said.
The world’s biggest oil company had net income of $21.7 billion, 30 percent higher than last year when the coronavirus pandemic had just begin to affect world oil demand. “The momentum provided by the global economic recovery has strengthened energy markets, and Aramco’s operational flexibility, financial agility and the resilience of our employees have contributed to a strong first quarter performance,” Aramco’s president and chief executive Amin Nasser said. Aramco has again stuck to the pledge it made at the time of its record-breaking initial public offering in late 2019 by paying a big dividend — about $18.8 billion — for the quarter.
“For our customers we remain a supplier of choice, and for our shareholders we continue to deliver an exceptional quarterly dividend,” Nasser said.
The dividend payment is nearly covered by free cash flow of $18.3 billion in the quarter, while Aramco’s gearing ratio — a measure of its indebtedness compared to its assets — was unchanged at 23 percent.
Capital expenditure, which most oil companies have cut back dramatically during the pandemic recession, came to $8.2 billion in the first three months of the year. Nasser was positive on the outlook for global oil demand as the world economy recovers from the ravages of the pandemic recession. “Given the positive signs for energy demand in 2021, there are more reasons to be optimistic that better days are coming,” he said.
The oil price has risen by more than a third since the start of the year, giving an immediate boost to Aramco revenues in the quarter, but this has to some extent been offset by big OPEC+ output cuts, backed up by additional voluntary reductions by Saudi Arabia. However, the rising price of oil also helped the Kingdom to slash its budget deficit for the first three months of the year to SR7.4 billion ($1.97 billion), according to a quarterly update on Tuesday from the Finance Ministry.
The government spent SR212 billion in the first three months of this year, a 6 percent annual reduction. Total revenue rose by 7 percent.
“The data reflects the focus of the government to lower the fiscal deficit, both by raising VAT which supported non-oil revenue growth in yearly terms, and lowering expenditure,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
“The higher oil price was also reflected in a quarterly increase in oil revenue.”
The momentum provided by the global economic recovery has strengthened energy markets, and Aramco’s operational flexibility, financial agility and the resilience of our employees have contributed to a strong first quarter performance.