Saudi Aramco earnings surge on higher oil output and prices

Riyadh

SAUDI Aramco's earnings soared as oil prices and production climbed, allowing the world's biggest crude producer to cover its quarterly dividend of US$18.75 billion with free cash flow.

Third-quarter profit rose to 114.1 billion riyals (S$41 billion) from 44.2 billion riyals year ago, beating a company-compiled estimate of US$29.1 billion. Free cash flow was US$28.7 billion.

Aramco and its Big Oil rivals have benefited from the global economic recovery, which has helped push crude prices up by about 65 per cent this year to more than US$80 a barrel.

That helped Aramco eclipse Apple to once again become the world's most profitable firm.

The state-controlled firm was also helped by higher oil output after Saudi Arabia ended unilateral supply cuts implemented as part of an Opec+ deal earlier this year.

The kingdom's crude production averaged 9.6 million barrels a day between July and September, up from 8.5 million in the second quarter.

"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," chief executive officer Amin Nasser said in a statement on Sunday.

Aramco shares rose as much as 1.5 per cent to 38.3 riyals before paring gains.

The stock has risen almost 9 per cent this year as oil prices recovered from the impact of the pandemic, helping the firm's market capitalisation exceed US$2 trillion.

Aramco's annual dividend of US$75 billion, the world's largest, is a crucial source of funding for Saudi Arabia.

The government, which owns 98 per cent of the stock, is trying to narrow a budget deficit that ballooned last year as energy prices tanked with the spread of the coronavirus.

Yet, even with crude prices surging, Aramco has eschewed calls from some analysts to pay out more cash to shareholders.

Instead, the company has used its cash to reduce gearing, which has fallen to 17.2 per cent from 23 per cent at the end of 2020.

The company is also sticking with its plans to spend about US$35 billion on capital expenditure this year, even as it pushes ahead with boosting maximum production capacity to 13 million barrels a day - a project which Aramco said should be completed by around 2027. BLOOMBERG