Saudi Aramco followed its Big Oil competitors with bumper earnings, boosted by a recovery in oil and chemical prices.
The world’s biggest energy company reported net profit of 95.5 billion riyals ($25.5 billion) in the second quarter, the highest level since the end of 2018. Free cash flow rose to $22.6 billion, above the state-controlled firm’s quarterly dividend of $18.75 billion for the first time since the start of the coronavirus pandemic.
The reopening of major economies has triggered a surge in commodity prices, with crude up around 40% this year. In the past two weeks, oil companies such as BP, Chevron and Royal Dutch Shell have said they will increase share buybacks and payouts, confident the worst of the pandemic is over.
Aramco’s annual dividend of $75 billion, the world’s largest, is a crucial source of funding for Saudi Arabia. The government, which owns 98% of the company’s stock, is trying to narrow a budget deficit that ballooned last year as energy prices tanked with the spread of the virus.
The 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,” Chief Executive Officer Amin Nasser said. “I remain extremely positive about the second half of 2021 and beyond.”
Gearing, a measure of net debt to equity, fell to 19.4% from 23% at the end of 2020, though it remains above management’s preferred cap of 15%. It declined thanks to higher cashflow and the Dhahran-based firm using some proceeds from the sale of a stake linked to oil pipelines to pay down debt. In June, Aramco finalized the $12.4 billion deal with a consortium led by U.S. group EIG Global Energy Partners.
Capital expenditure was $15.7 billion in the first half of the year and Aramco still expects it to be around $35 billion for all of 2021.
The company will release more detail financial statements on Monday, when Nasser will also hold an investor call.