Saudi Aramco posts record quarterly profit, announces H1 net income of $87.9bn

Saudi Arabian Oil Company (Aramco) announced its financial results for the second quarter of 2022, posting a 90 per cent year-on-year (YoY) increase in net income in Q2 and declaring a dividend of $18.8bn to be paid in the third quarter.

The results set a new quarterly earnings record for the company since its initial public offering in 2019 and were primarily driven by higher crude oil prices and volumes sold, and higher refining margins.

Aramco achieved a record quarterly and half-year net income of $48.4bn in the second quarter and $87.9bn in the first half of 2022, compared to $25.5bn and $47.2bn, respectively, for the same periods in 2021.

According to the company, the increase in both periods was primarily driven by higher crude oil prices and volumes sold, as well as strong refining margins during the second quarter and higher downstream margins in the first half of 2022.

Free cash flow increased by 53 per cent to $34.6bn in the second quarter and was $65.2bn during the first half of 2022, compared to $22.6bn and $40.9bn, respectively, for the same periods in 2021. This increase was mainly driven by higher cash from operating activities.

Return on average capital employed (ROACE) for the second quarter and half year ended June 30, was 31.3 per cent, compared to 16.7 per cent for the same periods in 2021, reflecting stronger crude oil prices and volumes sold, and improved downstream margins.

The company continued to strengthen its balance sheet to maintain a high investment grade credit rating across market cycles. The gearing ratio was 7.9 per cent on June 30, compared to 14.2 per cent on December 31, 2021, primarily due to higher operating cash flows, mainly reflecting stronger earnings, as well as improved downstream margins.

Funding costs continue to be optimised and the company made a partial prepayment to the public investment fund of the debt related to the company’s acquisition of a 70 per cent stake in SABIC in 2020. This reduced the principal amounts of the promissory notes outstanding by $12bn, in addition to the $8bn reduction in Q1 2022.

Aramco declared a dividend of $18.8bn for the second quarter, to be paid in Q3 2022. In addition, and as previously disclosed in its 2021 Annual Report, the company distributed bonus shares to shareholders in Q2 2022, at a rate of one share for every 10 shares held. Aramco aims to maintain a sustainable and progressive dividend in line with future prospects and underlying financial results.

Capital expenditure increased by 25 per cent to $9.4bn in the second quarter and by 8 per cent to $16.9bn for the first half of 2022, compared to the same periods in 2021. Aramco continues to invest to capture growth opportunities, progressing the strategic integration of its upstream and downstream segments, expanding its chemicals business, and developing prospects in low-carbon businesses.

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

“While global market volatility and economic uncertainty remain, events during the first half of this year support our view that ongoing investment in our industry is essential — both to help ensure markets remain well supplied and to facilitate an orderly energy transition.”

He added: “In fact, we expect oil demand to continue to grow for the rest of the decade, despite downward economic pressures on short-term global forecasts.

“But while there is a very real and present need to safeguard the security of energy supplies, climate goals remain critical, which is why Aramco is working to increase production from multiple energy sources — including oil and gas, as well as renewables, and blue hydrogen.

“We are progressing the largest capital programme in our history, and our approach is to invest in the reliable energy and petrochemicals that the world needs while developing lower-carbon solutions that can contribute to the broader energy transition.”

Operational highlights in H1
Saudi Aramco also demonstrated its reliable upstream performance, with average total hydrocarbon production of 13.6 million barrels of oil equivalent per day in the second quarter of 2022.

Aramco continued its strong track record of reliable supply, achieving 99.8 per cent reliability in the delivery of crude oil and other products in the second quarter of 2022.

The company’s gas expansion programme is progressing towards increasing production with the initial construction and design of the Jafurah Gas Plant ongoing. The facility has a planned processing capacity of 3.1 billion standard cubic feet per day (bscfd) of raw gas, expected to be completed in two phases by 2027.

Construction of the Hawiyah Unayzah Gas Reservoir Storage has reached an advanced stage, with the injection phase nearing completion. It is the first underground natural gas storage project in the kingdom, which helps to manage seasonal changes in demand and in turn improves asset utilisation and cost efficiency.

The company successfully deployed the Ghawar-1 supercomputer for reservoir simulation. It is the second largest supercomputer in the MENA region and is expected to increase the number of completed simulation runs, enabling Aramco to explore more opportunities within its existing resources.

Most recently, the company announced an equity purchase agreement to acquire Valvoline’s global products business (Valvoline Global Products) for $2.65bn.

Read: Aramco to acquire Valvoline Global Products for $2.65bn

The integration of SABIC into Aramco is progressing ahead of schedule and the company continues to capture synergies in multiple areas.

In May, Aramco’s refining and petrochemical joint ventures with PETRONAS in Malaysia, collectively known as PRefChem, started operations and will reach full capacity of 300,000 barrels per day by the end of the year. Aramco’s investment in PRefChem provides an expansion opportunity in an important growth market and offers new geographies for its crude oil production.

On June 15, Aramco published its inaugural Sustainability Report, which outlines ways the company plans to achieve net-zero Scope 1 and Scope 2 greenhouse gas emissions across its wholly-owned operated assets by 2050.

Read: Saudi Aramco plans to go big on carbon storage

Aramco also announced a major expansion of its Namaat industrial investment program with 55 agreements and memoranda of understanding now in place across the sustainability, digital, industrial, manufacturing, and social innovation sectors, aiming to create jobs and expand the kingdom’s energy and chemicals value chains.