Saudi Aramco Q2 profit soars on higher prices and demand recovery

Dubai

SAUDI Arabian state oil producer Aramco reported a near four-fold rise in second-quarter net profit on Sunday, beating expectations and boosted by higher oil prices and a recovery in oil demand.

Aramco said its results were supported by the global easing of Covid-19 restrictions, vaccination campaigns, stimulus measures and accelerating economic activity in key markets.

Aramco joins other oil majors which have reported strong results in recent weeks.

Exxon Mobil last month said that its net income for the second quarter came in at US$4.69 billion, or US$1.10 per share, compared with a loss of US$1.08 billion, or 26 cents per share, a year ago.

Royal Dutch Shell reported its highest quarterly profit in more than two years, with adjusted earnings at US$5.53 billion, compared with earnings of US$638 million a year earlier.

Oil prices, boosted by output cuts made by the Organization of the Petroleum Exporting Countries (Opec) and their allies, a group known as Opec+, closed at US$70.70 a barrel last Friday and has gained over 35 per cent since the start of the year.

"Our second quarter 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," Aramco CEO Amin Nasser said in a statement.

Aramco's net profit rose to 95.47 billion riyals (S$34 billion) for the quarter to June 30 from 24.62 billion riyals a year earlier.

Analysts had expected a net profit of US$23.2 billion, according to the mean estimate from five analysts.

Aramco's CEO told an earnings call that global oil demand was expected to hit 99 million barrels a day by the end of the year and 100 million barrels next year, Aramco is still working to increase its own capacity to 13 million barrels day, Mr Nasser said, reiterating a plan announced last year.

It declared a dividend of US$18.8 billion in the second quarter, in line with its own target, which will be paid in the third quarter.

Credit Suisse analysts said late last month that they expected Aramco to declare a special dividend because of higher oil prices that had helped boost its free cash flow.

Yousef Husseini, equity research analyst at EFG Hermes, said Aramco may be keeping the extra cash for taking part in the new state-backed Shareek (Partner) initiative, to partner private sector investments.

"I think the reason they maintained (the dividend) and our rationale was that they are retaining money to invest in future projects and particularly the 'Shareek' programme," he said.

Aramco's capital expenditure was US$7.5 billion in the second quarter, an increase of 20 per cent from a year earlier.

A consortium including Washington DC-based EIG Global Energy Partners in June closed a deal to buy 49 per cent of Aramco's pipelines business for US$12.4 billion. REUTERS