Saudi Arabian Oil Company (Aramco) announced its financial results for the second quarter of 2022, posting a 90% year-on-year (YoY) increase in net profit in the second quarter and declaring an 18.8 dividend. billions of dollars to be paid in the third quarter.
The results set a new quarterly profit record for the company since its 2019 IPO and were driven primarily by higher crude oil prices and volumes sold, as well as higher refining margins.
Aramco posted record quarterly and half-year net income of $48.4 billion in the second quarter and $87.9 billion in the first half of 2022, from $25.5 billion and $47.2 billion, respectively, for the same periods in 2021.
According to the company, the increase in both periods was mainly due to higher crude oil prices and volumes sold, as well as strong refining margins in the second quarter and higher downstream margins. in the first half of 2022.
Free cash flow increased 53% to $34.6 billion in the second quarter and was $65.2 billion in the first half of 2022, from $22.6 billion and $40.9 billion, respectively, for the same periods in 2021. This increase is mainly due to an increase in cash provided by operating activities.
Return on average capital employed (ROACE) for the second quarter and six months ended June 30 was 31.3%, compared to 16.7% for the same periods in 2021, reflecting higher crude oil prices and volumes sold, and improved downstream margins.
The company continued to strengthen its balance sheet to maintain an investment grade credit rating through market cycles. The gearing ratio was 7.9% as of June 30, compared to 14.2% as of December 31, 2021, mainly due to higher cash flow from operations, mainly reflecting stronger earnings, as well as the improved downstream margins.
Funding costs continue to be optimized and the company made a partial prepayment to the public investment fund of debt related to the company’s acquisition of a 70% stake in SABIC in 2020. This reduced principal amounts of outstanding promissory notes of $12 billion. , in addition to the $8 billion reduction in the first quarter of 2022.
Aramco declared a second quarter dividend of $18.8 billion, to be paid in the third quarter of 2022. In addition, and as previously reported in its 2021 annual report, the company distributed bonus shares to shareholders in the second quarter of 2022. , on the basis of one share for every 10 shares held. Aramco aims to maintain a sustainable and progressive dividend in line with future prospects and underlying financial results.
Capital expenditure increased 25% to $9.4 billion in the second quarter and 8% to $16.9 billion for the first half of 2022, compared to the same periods in 2021. Aramco continues to invest to seize growth opportunities, advancing the strategic integration of its upstream and downstream segments, developing its chemicals business and developing prospects in low-carbon businesses.
Saudi Aramco President and CEO Amin H. Nasser said, “Our record second quarter results reflect growing demand for our products, particularly as a low-cost producer with one of the the lowest upstream carbon in the sector.
“While global market volatility and economic uncertainty persist, events in the first half of this year reinforce our view that continued investment in our industry is essential, both to ensure markets remain well supplied and to facilitate an orderly energy transition.”
He added: “In fact, we expect oil demand to continue to grow for the remainder of the decade, despite downward economic pressures on near-term global forecasts.
“But while there is a very real and present need to preserve security of energy supplies, climate goals remain essential, which is why Aramco is working to increase production from multiple energy sources – including oil and gas, as well as renewables and blue. hydrogen.
“We are moving forward with the largest investment program in our history, and our approach is to invest in the reliable energy and petrochemicals the world needs while developing low-carbon solutions that can help drive a transition. broader energy.”
Operational highlights in H1
Saudi Aramco also demonstrated its reliable performance upstream, with an average total hydrocarbon production of 13.6 million barrels of oil equivalent per day in the second quarter of 2022.
Aramco continued its strong track record of reliable supply, achieving 99.8% reliability in the delivery of crude oil and other products in the second quarter of 2022.
The company’s gas expansion program is progressing towards increased production with the initial construction and design of the Jafurah gas plant underway. The facility has a planned processing capacity of 3.1 billion standard cubic feet per day (bscfd) of raw gas, which is expected to be completed in two phases by 2027.
The construction of the Hawiyah Unayzah gas storage reservoir has reached an advanced stage, with the injection phase nearing completion. This is the first underground natural gas storage project in the kingdom, which helps manage seasonal variations in demand and thus improves asset utilization and profitability.
The company has successfully deployed the Ghawar-1 supercomputer for reservoir simulation. It is the second largest supercomputer in the MENA region and is expected to increase the number of completed simulation runs, allowing Aramco to explore more opportunities within its existing resources.
Most recently, the company announced a stock purchase agreement to acquire Valvoline Global Products for $2.65 billion.
SABIC’s integration into Aramco is progressing ahead of schedule and the company continues to capture synergies in multiple areas.
In May, Aramco’s refining and petrochemical joint ventures with PETRONAS in Malaysia, known collectively as PRefChem, started operations and will reach full capacity of 300,000 barrels per day by the end of the year. . Aramco’s investment in PRefChem provides an opportunity to expand into an important growing market and provide new geographies for its crude oil production.
On June 15, Aramco released its first Sustainability Report, which outlines the means by which the company plans to achieve net Scope 1 and 2 greenhouse gas emissions across all of its operations. wholly-owned assets by 2050.
Read: Saudi Aramco plans to get into carbon storage
Aramco also announced a major expansion of its Namaat industrial investment program with 55 agreements and MoUs now in place across the sustainability, digital, industrial, manufacturing and social innovation sectors. , aimed at creating jobs and expanding the kingdom’s energy and chemical value chains. .