Saudi Aramco Q2 profit soars to 300% on demand recovery

DHAHRAN / WAM

The Saudi Arabian Oil Company Aramco announced on Sunday its second quarter 2021 financial results, reporting a 288 percent increase in net income from the same quarter of last year to $25.5 billion and declaring a dividend of $18.8 billion.
The Company’s net income for the first half of the year was $47.2 billion, representing a 103 percent increase over the same period in 2020, said an Aramco statement. The results were primarily driven by higher oil prices and a recovery in worldwide demand, supported by the global easing of Covid-19 restrictions, vaccination campaigns, stimulus measures and accelerating activity in key markets.
Commenting on the results, Aramco President and CEO, Amin H Nasser, said, “Our second quarter results reflect a strong rebound in worldwide energy demand and we are heading into the second half of 2021 more resilient and more flexible, as the global recovery gains momentum. While there is still some uncertainty around the challenges posed by Covid-19 variants, we have shown that we can adapt swiftly and effectively to changing market conditions.
“Our historic $12.4 billion pipeline deal was an endorsement of our long-term business strategy by international investors, representing significant progress in our portfolio optimisation programme. Our landmark $6 billion Sukuk reinforced our robust balance sheet, further diversifying our funding sources and expanding our investor base. And, once again, we delivered a dividend of $18.8 billion for our shareholders,” he said.
Aramco’s net income was $25.5 billion in the second quarter of 2021, compared to $6.6 billion in the same quarter of 2020. Net income for the first half of 2021 was $47.2 billion, compared to $23.2 billion in the first half of 2020.”

The increase in both periods was primarily driven by higher crude oil prices, improved downstream margins and the consolidation of SABIC’s results, partially offset by lower crude oil volumes sold and higher crude oil production royalties.
Free cash flow was $22.6 billion in the second quarter, and $40.9 billion for the first half of 2021, compared to $6.1 billion and $21.1 billion, respectively, for the same periods in 2020.
The gearing ratio was 19.4 percent on June 30, compared with 23 percent on December 31. The decrease was primarily due to higher cash and cash equivalents on 30th June, 2021, mainly driven by stronger operating cash flows and cash proceeds in connection with Aramco’s stabilised crude oil pipelines transaction.
Capital expenditure was $7.5 billion in the second quarter, and $15.7 billion for the first half of 2021, representing an increase of 20 percent and 15 percent, respectively, compared with the same periods in 2020.
This increase was primarily due to the start of initial phases of construction and procurement activities relating to increment projects, demonstrating the company’s ability to mobilise capital to target growth opportunities, and the consolidation of Saudi Basic Industries Corporation’s [SABIC – an Aramco subsidiary] capital expenditure. At the same time, the Company maintains a highly disciplined and flexible approach to capital allocation, and continues to expect its 2021 capital expenditure to be approximately $35 billion.

Aramco closed a $12.4 billion pipeline infrastructure deal with an international consortium that acquired a 49 percent stake in the newly formed Aramco Oil Pipelines Company, in which Aramco remains the majority shareholder. Under a 25-year lease and leaseback agreement, Aramco Oil Pipelines Company will receive a tariff payable by Aramco for stabilised crude oil flows, backed by minimum volume commitments. This investment demonstrates investor confidence in the Company’s long-term outlook.
The Company raised $6 billion through the sale of US dollar-denominated Shari’a-compliant securities to leading institutional investors. The issuance comprised three tranches of direct and unsecured Sukuk trust certificates issued under Aramco’s newly established International Sukuk programme. Funds raised were allocated for general corporate purposes.
Aramco continued its strong track record of reliable supply, achieving 100 percent reliability in the delivery of crude oil and other products in the second quarter of 2021.

The Company also demonstrated its reliable Upstream performance, with average total hydrocarbon production of 11.7 million barrels per day of oil equivalent in the second quarter of 2021.

The Company successfully completed and tied-in the Ain Dar and Fazran crude oil increments during the second quarter. These increments target secondary reservoirs with a combined production capacity of 175 mbpd, said the statement.