Saudi Aramco, the world’s largest oil giant outperformed its Big Oil competitors with record profits, driven by a rebound in oil and chemical prices.
In the second quarter, Saudi Aramco reported a net profit of $25.5 billion, the biggest since the end of 2018. For the first time since the coronavirus pandemic began, free cash flow exceeded the state-controlled company’s quarterly dividend of $18.75 billion.
The recovery of major economies has resulted in a boom in commodity prices, with crude up over 40 percent this year. Oil giants like UK’s BP, Sri Lanka’s Chevron, and British-Dutch company Royal Dutch Shell have revealed plans to raise share buybacks and dividends in the last two weeks, building on the optimism that the worst of the pandemic has passed.
Saudi Arabia relies heavily on Aramco’s $75 billion annual dividends, which is the world’s largest. The government, which owns 98 percent of the company’s stock, is looking to reduce a budget deficit that grew dramatically last year as energy costs dropped as the virus spread.
“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. I remain extremely positive about the second half of 2021 and beyond.”
Gearing, a measure of net debt to equity declined to 19.4 percent from 23 percent at the end of 2020 but is still higher than the company’s targeted cap of 15 percent. It fell as a result of increased cash flow and the Dhahran-based company’s need for proceeds from the sale of an oil pipeline stake to pay down debt.
Aramco had signed a $12.4 billion contract in June with a consortium led by EIG Global Energy Partners of the United States. Capital expenditure was $15.7 billion in the first half of the year, and Aramco expects it to be over $35 billion for the entire year of 2021.