Saudi Aramco profits soar on oil price rise: Update

Adds detail throughout from results call.

State-controlled energy firm Saudi Aramco said today its net profit more than doubled in 2021 against the previous year, largely thanks to improving economic conditions as the world continued its recovery from the worst of the Covid-19 pandemic.

"Last year, we saw a rebound in global oil demand following the unprecedented collapse of 2020," Aramco chief executive Amin Nasser said today. "We now expect global demand to go to pre-pandemic levels by the end of 2022."

Aramco's net profit rose by 124pc to $110bn from $49bn in 2020. The company attributed this to a combination of higher global oil prices, stronger refining and chemical margins and the consolidation of petrochemical producer Sabic's full-year results in 2020.

The Saudi state energy company produced an average of 12.3mn b/d of oil equivalent (boe/d) in 2021, of which 9.2mn b/d was crude — steady with last year's levels.

Nasser said the company expects to see revenues grow again this year, supported by higher crude production in line with the Opec+ group's roadmap to gradually phase out its output cuts by the end of the year.

"Since Opec+ is meeting every month [and raising production by] 400,000 b/d, there is an increase in production … and we are seeing also much revenue as a result of the higher prices that we see in the market for our crude," Nasser said. "At the same time, we are seeing better margins from our downstream assets, with more efficiency."

Aramco's free cash flow last year stood at $107.5bn, again more than double the $49.1bn it achieved in 2020. It declared a full-year cash dividend of $75bn, including $18.8bn for the fourth quarter that will be paid to shareholders in the first quarter of this year.

The lion's share of that dividend goes to the Saudi government, which still owns more than 94pc of the company's equity after the transfer in February of 4pc of Aramco's shares to the country's sovereign wealth fund, the Public Investment Fund (PIF).

The company's capital expenditure rose to $31.9bn in 2021, up by 18pc from $27bn in 2020. This was driven by increased activities in relation to crude oil increments, the Tanajib gas plant — which is expected on stream by 2024 and will process 2.5bcf/d of associated gas from the offshore Marjan and Zuluf heavy oil fields — and development drilling programmes.

Aramco said it expects capital expenditure to rise again this year to $40bn-50bn, with further growth expected year-on-year through the middle of the decade, in line with the company's belief that "substantial new investment" is needed to meet demand growth at a time of declining investment in the upstream globally.

The "majority" of this capital expenditure "will go to the upstream," for two things, Nasser said.

First, to deliver Aramco's plans to raise its sustainable crude oil capacity to 13mn b/d by 2027, from around 12mn b/d today, not including Saudi Arabia's share of the Neutral Zone, which it shares 50:50 with Kuwait. A senior Saudi source told Argus last month that with the kingdom's share of production from the Neutral Zone, that will put the country's capacity at close to 13.25mn b/d by 2027.

The second is to increase the company's gas output by "more than 50pc" by 2030. Based on 2020 production of 9.98bcf/d, that would put Aramco's gas output at above 20bcf/d by the end of the decade. Nasser said the gains will come from conventional projects, but also unconventional projects like the 200 trillion cf Jafurah field where Aramco expects to boost production from 200mn cf/d in 2025 to 2bn cf/d by 2030.

Downstream, Aramco is pushing ahead with plans to expand its liquids-to-chemicals capacity to 4mn b/d.

"We are currently working on a number of opportunities with Sinopec… [and exploring opportunities with] other players in Asia, all for mainly highly integrated complexes with more than 50pc liquid to chemicals," Nasser said. "That would represent huge growth opportunities as we would ensure placement of our crude over the long-term."

By Nader Itayim