Saudi Aramco’s full-year profit more than doubled as a result of higher oil prices

An employee inspects Saudi Aramco’s oil facility in Abqaiq, Saudi Arabia, October 12, 2019.

Maxim Shemetov | Reuters

Saudi oil giant Aramco on Sunday reported a rise in its full-year profit, posting a year-over-year increase in net profit to $110 billion.

Aramco’s net income for 2021 increased by 124% to $110 billion in 2021, compared to $49 billion in 2020, due to higher crude oil prices, strengthening of refining and chemicals margins, consolidation of the chemical business, SABIC, full-year results.

The numbers came in line with expectations, with analysts polled by Reuters forecasting net income of $109.7 billion for the full year. Aramco shares on the Saudi Tadawul Stock Exchange rose by about 4% in trading on Sunday after the result.

“Our strong results are a testament to our financial discipline, resilience through evolving market conditions, and unwavering focus on a long-term growth strategy that targets value growth for our shareholders,” Aramco CEO Amin Nasser said in the results statement.

oil spike

Aramco benefited from the rise in oil prices during 2021, according to an international standard Brent crude It rose above $80 a barrel by the end of the year, up nearly 50% for a 12-month period. Lack of supplies added to a complex set of factors that created great uncertainty across the energy and commodity complex, even before the Russian invasion of Ukraine.

“Although economic conditions have improved significantly, the outlook remains uncertain due to various macroeconomic and geopolitical factors,” he added. This comes after the International Energy Agency warned that the oil market is heading towards it ‘Biggest supply crisis in decades’ With Russian sanctions hitting and buyers staying away from its exports.

“We see great demand for oil. Unfortunately, there is a contraction in global spare production capacity combined with low inventories and a lack of investment,” Nasser said in a call about earnings on Sunday. He also blamed the “transition plan Totally unrealThe current pricing dynamic.

The result and the earnings call also came just hours after Saudi authorities confirmed another attack on Aramco facilities on Sunday Houthi rebels use missiles and drones to target at least six locations Across Saudi Arabia, including an Aramco fuel depot and a liquefied natural gas plant.

“There were no injuries or deaths, and there was no impact on the company’s supplies to customers,” Nasser said.

“We have demonstrated our ability to respond quickly and effectively,” Nasser said, referring to Aramco’s response to Major attack on its facilities in 2019. “We were able to quickly restore operations, while ensuring the reliability of the supply for our customers.”

Special Payment Plan

Aramco also announced a fourth-quarter dividend of $18.8 billion, to be paid in the first quarter of 2022. The distributions cover an increase in free cash flow to $107.5 billion in 2021, compared to $49.1 billion in 2020.

Aramco said it will recommend the use of $4 billion in retained earnings to pay bonus shares to investors, subject to approval. Under the recommendation, shareholders will receive 1 free share for every 10 shares held. As a result, the dividend for 2021 totaled $75 billion in cash, plus free stock.

The earnings numbers are in stark contrast to the company’s 2020 earnings, which saw a 44% drop from the previous year due to the collapse in demand caused by the coronavirus pandemic.

Nasser at the time described Aramco’s fiscal year 2020 as one of its “most challenging” years in recent history.

increase capacity

The company also said it would invest to increase crude oil production capacity to 13 million barrels per day by 2027, expand its liquid production to chemicals, and look to increase gas production by more than 50% by 2030.

Aramco has also said that it wants to achieve net Scope 1 and Scope 2 greenhouse gas emissions across its wholly owned assets by 2050. Scope 1 refers to direct emissions from sources owned or controlled by the company, while Scope 2 covers indirect emissions from power generation purchased consumed by the company.

“We are doing our part but it is not enough. Other players in the industry also have to do their part and increase investment,” Nasser said, noting that the demand for oil will continue to accelerate in the coming years.

Capital expenditures in 2021 were $31.9 billion, an increase of 18% over 2020, primarily driven by increased activities related to crude oil increments, the pilot gas plant and development drilling programs. Aramco expects capital spending for 2022 to be approximately $40 to $50 billion, with further growth expected until around the middle of the decade.

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