Aramco 2Q profit at record on high oil prices, demand

Saudi state-controlled Aramco's second-quarter profit exceeded that of the three largest-earning oil majors combined, pushed higher by increases in oil prices, sales volumes and refining margins.

Aramco said today it broke its quarterly profit record posted in May, with a 90pc year-on-year jump to $48.4bn in the second quarter, more than it made in the first six months of 2021.

Comparatively, ExxonMobil, Shell and Chevron recorded a collective profit of $47.61bn in the second quarter, according to Argus calculations.

Aramco's free cash flow rose by 53pc on the year to $34.6bn in the second quarter, with the company citing increases in cash from operating activities. It left its dividend guidance unchanged at $18.8bn, to be paid in the third quarter. Almost all of this goes to the Saudi state.

"We all know the energy market has been characterised by volatility and instability during the first half of this year," Aramco chief executive Amin Nasser told reporters, attributing the record second-quarter results to higher demand for the company's products. The company forecast oil demand will continue to grow for the remainder of the decade, "despite downward economic pressures on short-term global forecasts." Nasser assessed current global oil demand as "healthy," based on customer nominations "especially from Asia."

But he flagged supply-side constraints.

"Ongoing investment in our industry is essential — both to help ensure markets remain well supplied and to facilitate an orderly energy transition," he said, describing "strained" global spare capacity of less than 2mn b/d and "declining fast."

Saudi and Opec+ officials have faced consumer pressure to increase output this year. The producers' alliance will this month unwind the roughly 9.7mn b/d of cuts it implemented in May 2020 in response to the Covid-19 pandemic, and will add a further 100,000 b/d of output in September.

"Our commitment is, any time we have been asked [by the Saudi government]… to go to our maximum sustained capacity, which is currently 12mn b/d, we'll be able to bring this on the stream quickly and sustainably," Nasser said.

Aramco said it produced 13.6mn b/d of oil equivalent (boe/d) in the second quarter, up from 13mn boe/d in the January-March period. It did not break out crude output, which Argus estimates at 10.46mn b/d in the second quarter and 10.14mn b/d in the first.

Nasser said Aramco is "progressing very well" with plans to raise capacity from 12mn b/d to 13mn b/d by 2027.

"In 2025, we should go to 12.3mn b/d, in 2026 we should go to 12.7[mn b/d]," he said. He expects a 75,000 b/d increase from the Dammam field, a 300,000 b/d addition from Marjan, 250,000 b/d from Berri and 600,000 b/d from Zuluf. Beyond 2027, Nasser said there should be a 700,000 b/d hike from the Safaniyah field.

Aramco's gearing ratio narrowed to 7.9pc in June, from 14.2pc at the end of December last year. The company's capital expenditure (capex) was $9.4bn in the second quarter, up by 25pc from a year earlier. It retained guidance of $40bn-50bn for 2022, and continues to expect rises until the middle of the decade.

"There will be an increase year-on-year to meet our growth… in oil, in gas, in hydrogen, in crude to chemical… until 2025, and then we will hope it will stabilise later," Nasser said.

He did not confirm plans for a partial listing of its trading arm, but said there is "some expectation that we will do some of that [floating] with some entities within Aramco."

By Ruxandra Iordache