Saudi Aramco’s net earnings double to $110 billion on rising oil demand

Saudi Aramco has reported its highest annual profits since an IPO in 2019, as the world’s largest oil exporter benefited from rebounding energy demand.

Net income more than doubled to $110 billion in 2021, the company said Sunday, and it maintained its full-year cash dividend — one of the highest in the world — at $75 billion. Analysts had forecast net income of $109.7 billion, according to an average compiled by the company.

The state-backed group, which reported profits of $49 billion a year earlier, said the 124 percent surge was due to “higher crude prices, stronger refining and chemical margins and the consolidation of SABIC’s full-year results.” The Company Acquired 70 percent of the shares in Sabic, the Saudi petrochemical company, in 2020.

The dividend included $18.8 billion for the fourth quarter, which should be paid before the end of March. The payment is a major source of revenue for the Saudi government, which owns 98 percent of Saudi Aramco’s stock after having held a small portion of the company’s stock listed in December 2019.

The company also announced it would be paying out $4 billion in bonus shares to existing shareholders.

Gearing, which the company defines as a measure of leverage, fell to 14.2% from 23% in December 2020 as the company deployed some of its $107.5 billion in free cash flow. This compares to a 4.9 percent drop in the first quarter of 2020, before the stock price drop due to the coronavirus pandemic forced the company to borrow heavily last year to maintain its dividend.

Saudi Aramco and international peers including Chevron, ExxonMobil and BP have benefited from the global economic recovery and supply shortages that pushed oil prices above $100 a barrel for the first time in more than seven years.

Prices were further compounded by fears that a boycott of Russian oil following its invasion of Ukraine could take up to 2.5 million barrels a day of crude and petroleum products off the market, and reluctance by Saudi Arabia and its allies in the Opec+ group pumped up to boost production to compensate.

The cartel has stuck to one agreement reached last year increase production by no more than 400,000 b/d each month, even if some members have not met their quotas. The US and other big consumers have repeatedly urged countries with significant spare capacity, such as Saudi Arabia and the United Arab Emirates, to pump more.

Saudi Aramco said average crude oil production in 2021 was 9.2 million barrels per day as it gradually replaced the production cut early in the pandemic. It is in the process of increasing its maximum production capacity from 12M to 13M b/d.

The company added that it is investing in carbon capture and storage, renewable energy and low-carbon hydrogen production after committing in October to achieve net-zero operational emissions from its wholly-owned assets by 2050, which the industry sees as a Scope 1 and Scope 2 are known.

The decision came after a move by the Saudi government to cut carbon emissions by 2060.

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Adam Bradshaw

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