Aramco to benefit from oil price and demand recovery
SSaudi Aramco’s pledge to pay an annual $75 billion to shareholders during its first five years as a publicly traded company might even get a boost as it increases production.
audi oil giant Aramco will benefit from the oil prices and demand recovery according to Bank of America Merrill Lynch (BoAML).
“We believe that Aramco is uniquely positioned in the global oil world to meet potential resurgence of oil demand.
Should bullish oil price demand assumptions materialize, we would expect Aramco to generate close to $100 billion in free cash flow in 2022,” BoAML said in a report. The bank said, the company can go beyond its commitment of paying $75 billion dividend. We believe that dividend upside is also possible at higher oil prices/output given Aramco’s stellar cash flow generation.
$75-billion payout no problem
Separately, Bank of America said that Saudi Aramco’s pledge to pay an annual $75 billion to shareholders during its first five years as a publicly traded company might even get a boost as it increases production and benchmark crude prices head back toward $70 a barrel. The rally in oil prices has all but expunged any likelihood that Saudi Aramco will fail to meet its $75 billion dividend payout next year, the bank said. “Aramco would be well-placed to implement its higher dividend distribution guidance given during the IPO and even increase dividends beyond its minimum $75 billion pledge,” Bank of America analysts including Houston-based Doug Leggate and Karen Kostanian in Moscow said in a report. “Aramco is one of the few companies globally that can substantially boost output without committing additional capex.”
Oil recovers from 2020 perfect storm
Oil last week crossed $65/bbl as market tightened. In 2020 the oil market experienced the perfect storm of collapsing demand amid a Saudi Russian price war. Yet, this year oil has staged a remarkable recovery and Saudi Arabia, the world’s largest crude exporter, is benefiting as oil rebounds from last year’s slump amid OPEC+ production limits and signs of a global economic recovery. Brent jumped last week to $69.36 a barrel as of Friday, its highest close in almost two years.