Saudi Aramco follows Big Oil rivals with bumper Q1 earnings

Dubai

SAUDI Aramco's profit soared in the first quarter following a recovery in global oil and gas markets, though free cash flow remained too low to fully cover dividend payments.

The world's biggest energy firm kept its quarterly payout, almost all of which goes to the Saudi Arabian government, at US$18.75 billion. The money is a vital source of cash for the kingdom as it tries to narrow a budget deficit that ballooned last year, with the coronavirus pandemic sinking oil prices and shutting down local businesses.

The bumper results follow those last week of Big Oil firms such as Royal Dutch Shell and BP, whose earnings are back to pre-pandemic levels as major economies reopen and more people are vaccinated. Brent crude has gained 31 per cent this year to more than US$68 a barrel.

"There are more reasons to be optimistic that better days are coming," chief executive officer Amin Nasser said in a statement on Tuesday. "The momentum provided by the global economic recovery has strengthened energy markets."

Aramco's adjusted net income for the quarter was 78.6 billion riyals (S$28 billion), up 24 per cent year-on-year and higher than analysts' average estimate of roughly US$19 billion. Free cash flow was US$18.3 billion, an increase from US$15 billion. The firm expects capital expenditure to be US$35 billion in 2021, a figure unchanged from what it said in March.

The company, based in Dhahran in eastern Saudi Arabia, has seen its debt load spike as earnings collapsed with the spread of the pandemic and it opted to maintain the US$75 billion annual dividend.

Gearing, a measure of net debt to equity, increased from minus 5 per cent in early 2020 to 23 per cent by the end of the year as Aramco borrowed to fund the dividend and buy a US$69 billion stake in chemicals maker Saudi Basic Industries from the kingdom's sovereign wealth fund.

The debt ratio remained the same at the end of March, but may fall in this quarter after a US-led group agreed to invest US$12.4 billion in Aramco's oil pipelines. The Saudi company is also considering selling a stake linked to its natural-gas pipe-lines. BLOOMBERG