Saudi Aramco on Sunday reported its highest quarterly profit since the state oil giant went public in 2019, boosting its first-half earnings, driven by higher oil prices and refining margins.
Aramco’s net profits jumped 90% in the April-June period compared to the same time last year, helping its first-half earnings reach nearly $88 billion. The increase is a boon for the kingdom and the crown prince’s spending power as people around the world pay higher oil prices at the pump.
Aramco joins oil majors such as ExxonMobil and BP that have reported strong or record-breaking results in recent weeks after Western sanctions against major exporter Russia squeezed an already undersupplied global market causing a surge in crude and natural gas prices.
The first-half earnings were lifted by strong second quarter earnings that hit $48.4 billion – a figure higher than the first full half year of 2021, when profits reached just $47 billion.
The oil and gas company, which is nearly entirely state-owned by Saudi Arabia, said this sets a new quarterly earnings record for Aramco since it first floated around 5% of the company on the Saudi stock market in late 2019.
Aramco said profits were helped by higher crude oil prices and volumes sold, as well as higher refining margins. The vast oil reserves belonging to Saudi Arabia are among the cheapest to pump and produce in the world.
Aramco’s financial health is crucial to Saudi Arabia’s stability. Despite years of efforts to diversify the economy, the kingdom continues to rely heavily on oil and gas sales for revenue in order to pay public sector wages, subsidies, generous benefits to Saudi citizens, keep up its defense spending and carry out Crown Prince Mohammed bin Salman's Vision 2030 infrastructure goals.
Brent crude has been trading at around $100 a barrel, even as OPEC, led by Saudi Arabia, and non-OPEC producers, led by Russia, have incrementally increased production levels that had been cut during the height of the pandemic.
Aramco President CEO Amin Nasser said the latest financial results reflect increasing demand for oil, even as countries around the world, including Saudi Arabia, pledge to cut their carbon emissions to avert catastrophic global warming levels driven by the burning of fossil fuels.
"The world is calling out for affordable, reliable energy and we are answering that call," he said, before adding that Aramco expects oil demand to continue to grow for the rest of the decade, despite downward economic pressures and inflation.
"At a time when the world is worrying about energy security, you are investing in the future of our business. Our customers know that whatever happens, Aramco will always deliver," Nasser said in a short video released with the financial results.
Saudi Arabia is currently producing around 10 million barrels per day, with much of that exported to Asia and its largest customer, China. The crown prince said last month that the kingdom’s maximum production capacity is 13 million barrels per day, and Aramco said it is working to expand its scope to one day reach that ceiling.
Nasser voiced concern over a lack of global investment in hydrocarbons that has led to "very limited" spare capacity. He said Aramco stands ready to raise oil output to its maximum sustained capacity of 12 million barrels per day should the Saudi government ask.
Aramco said its average total hydrocarbon production was 13.6 million barrels of oil equivalent per day in the second quarter. The company is working to increase production from multiple energy sources, including renewables and blue hydrogen as well as oil and gas, as it works on both energy security and climate goals, Nasser said.
Capital expenditure increased by 25% to $9.4 billion in the quarter compared to the same period in 2021. Aramco said it continued to invest in growth, expanding its chemicals business and developing prospects in low-carbon businesses.
It is also currently studying opportunities in the liquid-to-chemicals sector with a focus on the Asian market.
The company will pay a dividend of $18.8 billion for the second quarter to shareholders, as it has promised to do since its initial public offering (IPO). The higher profits bode well for the Saudi government, which is the main shareholder of Aramco.
In July, Exxon posted its biggest quarterly profit ever, a net income of $17.9 billion, an almost fourfold increase from a year earlier, while European majors Shell and TotalEnergies also benefited from surging margins for making fuels like gasoline and diesel.
The Saudi stock market, up 11% this year, is very promising for company listings in the near future, Nasser said, adding that there is "some expectation" that Aramco might list some entities within the firm.
Aramco shares, which were little changed on Sunday, have risen more than 25% this year.
The oil giant is working to merge two energy trading units, with Aramco Trading Co. to absorb Motiva Trading, ahead of a potential IPO of the business, sources have said.