ARAMCO Q1 PROFIT RISES AMID OIL RALLY
▶ Net income jumps to $39.47bn, up 82% from the corresponding quarter last year
Saudi Aramco, the world’s largest oil-producing company, reported about 82 per cent surge in first-quarter net profit following higher crude prices, volumes sold and improved downstream margins.
Net profit after zakat for the three-month period to the end of March increased to $39.47 billion, from $21.72bn in the year-earlier period, the national oil company of Saudi Arabia said yesterday, in a filing to the Tadawul stock exchange, where its shares are traded.
The quarterly earnings are a record for the company since its initial public offering in 2019. Net income for the first quarter of this year increased by 22 per cent from the fourth quarter last year.
Aramco plans to pay a first-quarter dividend of $18.8bn in the second quarter and has approved the distribution of one bonus share for every 10 shares held in the company.
“Against the backdrop of increased volatility in global markets, we remain focused on helping meet the world’s demand for energy that is reliable, affordable and increasingly sustainable,” said Aramco president and chief executive Amin Nasser.
Brent and the West Texas Intermediate have gained more than 60 per cent since last year. This is largely due to successful vaccination drives in developed economies. This, in turn, has helped more countries to relax restrictions, leading to a rebound in the travel industry.
Brent, the global benchmark for two thirds of the world’s oil, ended trading last week at $111.5 a barrel, while WTI, the gauge that tracks US crude, ended the week at $110.5 a barrel. Owing to the Ukraine war-related trade and production disruptions, Brent is expected to average $100 a barrel this year, its highest level since 2013, the World Bank has said. Some investment banks estimate oil prices will average between $120 to $135 a barrel this year.
Geopolitics, higher energy prices and inflation prompted the International Monetary Fund last month to lower its growth estimate for the global economy this year to 3.6 per cent and in 2023, revising it down 0.8 and 0.2 percentage points from an earlier forecast.
“Energy security is vital and we are investing for the long term, expanding our oil and gas production capacity to meet anticipated demand growth and creating long-term shareholder value by capitalising on our low lifting cost, low upstream carbon intensity, and integrated downstream business,” Mr Nasser said.
“During the first quarter, our strategic downstream expansion progressed further in both Asia and Europe.”
Aramco’s quarterly revenue rose by about 72 per cent to nearly $125bn from the corresponding period last year. Revenue rose about 16 per cent from the fourth quarter last year.
Cash flow from operating activities increased 44 per cent in the first quarter to $38.2bn from the same period last year. Free cash flow increased 68 per cent year-on-year to $30.6bn. The company’s gearing ratio was reduced to 8 per cent in the first quarter from 14.2 per cent at the end of last year, indicating cash flow should continue to benefit from higher oil prices this year.
Yesterday, the company said its shareholders approved a board recommendation to increase capital by way of granting bonus shares through the capitalisation of 15bn Saudi riyals ($4bn) from the company’s retained profits.
The company’s share capital will increase 25 per cent to 75bn riyals and the number of shares will rise from 200 billion to 220 billion, it said. Last Wednesday, Aramco beat Apple to become the world’s most valuable company when its market value reached $2.43 trillion. Apple shares dropped about 5.2 per cent on May 11 to $146.5 a share at the close of trading, giving it a market value of $2.37tn.
Following its earnings announcement, Aramco’s shares jumped almost 4.2 per cent yesterday, boosting its market value to $2.48tn at the close of trading. Apple’s market value at the end of trading on Friday was $2.38tn. Aramco’s shares have gained about 31 per cent since the start of the year, while Apple’s shares have dropped more than 19 per cent.
Aramco listed its shares on the Saudi Stock Exchange, Tadawul, in 2019, raising $25.6bn and later selling more shares, boosting the total to $29.4bn.