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Saudi Aramco is world's most profitable company

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Aramco's net income in 2018 was US$111.1 billion, beating Apple's US$59.5 billion and Royal Dutch Shell's US$23.9 billion.

THE earnings of Saudi Arabia's giant oil company have long been a mystery, kept under wraps by the country's government. But on Monday, Saudi Aramco opened its books, revealing that it generated US$111.1 billion in net income in 2018, making it probably the world's most profitable company by far.

It handily beat Apple (US$59.5 billion in net income in 2018) and ran laps around other oil companies like Royal Dutch Shell (US$23.9 billion) and Exxon Mobil (US$20.8 billion).

Aramco produced 13.6 million barrels per day (bpd) in 2018 on average, more than three times the 3.8 million bpd reported by Exxon Mobil, according to the report. Overall, its revenue was about US$360 billion. The disclosure reveals a company that is hugely profitable but also tightly bound to one country and the price of oil.

Aramco issued the financial data as it prepares to borrow up to US$15 billion through a bond sale, in what could signal a more aggressive approach to capital-raising for both the company and Saudi Arabia, which is seeking to cut its dependence on oil and gas revenue.

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The money will help finance Aramco's US$69 billion purchase of most of a state-owned petrochemical company from Saudi Arabia's sovereign wealth fund, whose chairman is Crown Prince Mohammed bin Salman. The crown prince wants to diversify Saudi Arabia's economy, and the sovereign wealth fund has been investing in technology companies like Uber and Tesla as a way of doing so. A planned stock sale in 2018 by Aramco was expected to raise money for that purpose, but it was postponed.

The sale of a stake in Saudi Basic Industries, the petrochemical company, appears to be an alternative way to raise the funds.

While the crown prince pursues new investments and tries to recover from the political fallout caused by the killing of Saudi journalist Jamal Khashoggi in 2018, Aramco also appears to be trying to make itself into a broader energy producer and, thus, more attractive if the government decides once again to try to sell a slice of the company.

Aramco CEO Amin Nasser has said that the company is pursuing international acquisitions in areas such as liquefied natural gas, a chilled fuel that, like oil, can be transported globally on ships. The financial results also show how the company's fortunes rise and fall with the price of oil. In 2016, for instance, a time of low prices, the company reported only US$13.3 billion in net income.

For investors, Aramco's ties to the Saudi government are also a persistent concern. "Unlike Exxon and Chevron, its revenue streams are highly dependent on a single country that could face real instability risks," Ayham Kamel, an analyst at Eurasia Group, a consulting firm, wrote in a recent note to clients.

But analysts said that the financial information revealed on Monday showed that Aramco had plenty of firepower for more deals. Aramco has "a huge amount of room" to issue debt, said David Staples, a managing director at Moody's Investors Service.

The agency rated the company A1, a strong rating but below that of large Western oil companies including Exxon Mobil and Shell. Mr Staples said the lower rating reflected the concentration of most of Aramco's operations in Saudi Arabia, which shares the same credit rating, and the government's dependence on oil and gas revenue. The thinking is that if Saudi Arabia were to encounter political instability or hard times, the oil company would feel the impact. "We have to take into account the risk profile" of the country, he said. NYTIMES