Saudi Aramco’s profits rise 90% in the second quarter amid soaring energy prices

An employee looks at the Saudi Aramco oil facilities in Abqaiq, Saudi Arabia, October 12, 2019.

Maxim Chemetov | Reuters

Saudi oil giant Aramco reported a dramatic 90% increase in second-quarter net profit and record half-year results on Sunday as high oil prices continue to generate historic windfalls for Big Oil.

Aramco said strong market conditions helped lift its second-quarter net profit to $48.4 billion from $25.5 billion a year earlier. The result easily exceeded analysts’ estimates of $46.2 billion.

“Our record second quarter results reflect growing demand for our products, particularly as a low-cost producer with one of the lowest upstream carbon intensities in the industry,” said the President and CEO. of Aramco, Amin Nasser.

Aramco said half-year net profit soared to $87.9 billion, easily outpacing the biggest publicly traded oil majors including Exxonmobil, Chevron and BP and other “Big Oil” companies, all of which benefit from a soaring commodity prices.

Oil prices jumped above $130 a barrel earlier this year as the global energy crisis, compounded by supply disruptions stemming from Russia’s invasion of Ukraine, rattled global markets and contributed to decades of high inflation.

“While global market volatility and economic uncertainty persist, events in the first half of this year reinforce our view that continued investment in our industry is essential – both to ensure markets remain well supplied and to facilitate an orderly energy transition,” Nasser added.

Aramco said it expects the post-pandemic recovery in oil demand to continue for the rest of the decade, despite what it called “downward economic pressures on global forecasts at short term”.

The explosive results are also a major boon for the Saudi government, which relies heavily on its Aramco dividend to fund public spending. The Kingdom recorded a budget surplus of $21 billion in the second quarter.

Aramco said it would maintain its $18.8 billion third-quarter dividend payout, capped by a 53% increase in free cash flow to $34.6 billion.

Major wins

Aramco is using its large gains to invest in its own hydrocarbon and renewable energy production capacities, while paying down its debt.

“We are moving forward with the largest investment program in our history, and our approach is to invest in the reliable energy and petrochemicals the world needs, while developing low-carbon solutions that can contribute to a broader energy transition,” the company said.

Saudi Arabia, alongside its OPEC+ counterparts, has been under increasing pressure stimulate oil production to mitigate high prices. Company executives said limited global spare parts production capacity was a major concern for the global price outlook.

Aramco said it reached total hydrocarbon production of 13.6 million barrels of oil equivalent per day in the second quarter and was working to increase its capacity from 12 million barrels of oil per day to 13 million barrels. of oil per day by 2027.

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