Saudi Aramco reported its highest quarterly earnings since listing its shares in 2019, as the world’s biggest oil exporter profited from resurgent global demand.
Net income at the state-backed group rose to $30.4bn in the third quarter from $11.8bn a year earlier, driven by rising prices, higher volumes sold and stronger refining and chemicals margins, the company said in a statement on Sunday. Analysts had forecast net income of about $29.1bn, according to an average compiled by the company.
Despite beating expectations, generating free cash flow of $28.7bn and calls from some analysts to increase returns to shareholders, Saudi Aramco maintained its dividend for the quarter at $18.8bn, in line with its guidance.
Amin Nasser, Saudi Aramco’s chief executive, assigned the group’s strong performance to “increased economic activity in key markets and a rebound in energy demand, as well as our unique low-cost position”.
“Some headwinds still exist for the global economy, partly due to supply chain bottlenecks, but we are optimistic that energy demand will remain healthy for the foreseeable future,” he said.
The company’s annual dividend, currently set at $75bn, is a vital source of revenue for the Saudi Arabian government, which still owns 98 per cent of Saudi Aramco stock after it listed a sliver of the company’s shares in December 2019.
Saudi Aramco borrowed heavily to maintain its dividend during the slump in prices caused by the coronavirus pandemic last year. As a result, gearing, which the company defines as a measure of the degree to which operations are financed by debt, surged from minus 4.9 per cent in the first quarter of 2020 to 23 per cent in December. It stayed at that level in the first quarter of this year.
The group reduced gearing to 19.4 per cent in the second quarter and cut it again in the last three months to 17.2 per cent, a move it attributed primarily to higher cash flows. Capital expenditure this year was still forecast at about $35bn, it said.
Saudi Aramco, like its international rivals including Chevron, ExxonMobil and BP, have all benefited from the global economic recovery this year, which has pushed oil prices above $80 a barrel for the first time in more than three years.
Prices have been further supported by Saudi Arabia and its allies in the Opec+ group carefully controlling the return of production that they cut at the start of the pandemic. The cartel has agreed to increase output at a level of 400,000 barrels a day every month but resisted pressure from the likes of US, Japan and India to move faster.
Saudi Aramco said it had produced about 9.5m b/d of crude in the last three months, up from about 8.5m b/d in the second quarter.
Unlike its international peers, many of which have pledged to gradually cut oil output to reduce emissions, Saudi Aramco is in the process of increasing its maximum production capacity from 12m b/d to 13m b/d.
Last week, it followed a pledge by Saudi Arabia to cut carbon emissions by 2060 with its own commitment to achieve net zero operational emissions, known in the industry as scope 1 and scope 2, from its wholly owned assets by 2050, but it is yet to provide to any further details.
“Looking ahead, we are maintaining our strategy to invest for the long term, and we will build on our record of low-cost and low-carbon intensity performance to advance our recently announced [net zero] ambition,” Nasser said on Sunday.