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Saudi ARAMCO Doubles Profits As Oil Prices Soar

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Petroleum, petrodollar and crude oil concept | Saudi ARAMCO Doubles Profits As Oil Prices Soar | featured

Oil giant Saudi Aramco reported that it doubled its net profit to $110 billion in 2022. This happened on the heels of surging oil prices worldwide.

The company posted $110 billion in net income in 2021, which is more than double the $49 billion it posted in 2020.

RELATED: Crude Oil Prices Are Heading Towards $100 Per Barrel

Saudi Aramco Posts $110 Billion In Net Income

Aramco company logo on a website with blurry stock market developments in the background | Saudi Aramco Posts $110 Billion In Net Income

Saudi Aramco’s 2021 net income totaled $110 billion, a 124% gain from its 2020 income of $49 billion. Higher crude prices, stronger refining and chemicals margins, and the consolidation of its chemicals business contributed to the gains. 

Analysts covering the petroleum industry expected Saudi Aramco’s stellar performance.  Consensus estimates gave a previous forecast of $109.7 billion, which is more or less at par with the $110 billion actual.

In fact, Saudi Aramco shares on the local exchange rose by only 4% after the company posted full year results. Saudi Aramco CEO Amin Nasser issued a statement as part of its release of the results.

He credited the results to “financial discipline, flexibility through evolving market conditions and steadfast focus on our long-term growth strategy”.  As a result, the oil giant managed to target “value growth for our shareholders.” 

Surging Oil Prices in 2021

Helping Aramco post profits is the surge of oil prices beginning in 2021. By the end of the year, Brent crude rocketed to $80 a barrel. Oil prices rose by more than 50% during the previous 12 months.

The pandemic also led to a crippling supply chain crisis that contributed to higher prices. Add in inflation woes and oil prices hit highs even before Russia invaded Ukraine.  

However, the outlook remains uncertain “due to various macro-economic and geopolitical factors,” Nasser added. Despite improvements to the global economy, geopolitical tensions can affect the balance considerably.

The International Energy Agency recently warned that the oil market is heading towards the “biggest supply crisis in decades’. It is said that the ongoing blockade against Russian oil exports can potentially bring down the world’s oil supply. 

Limited Oil Supplies Will Haunt 2022

Aramco acknowledges renewed demand but said that supplies will remain limited. “We see healthy oil demand.

Unfortunately, there is shrinking global spare capacity, combined with low inventories and a lack of investment,” Nasser said. In addition, he blamed “a transition plan that is totally unrealistic” for the current pricing dynamic. 

In addition, the continued tension in the Middle East will also affect oil prices. Hours before the earnings call, Saudi Arabia confirmed an attack on Saudi Aramco facilities last Sunday.

Yemen’s Houthi rebels used missiles and drones to hit six company sites across Saudi Arabia. This includes an Aramco fuel depot and a liquified natural gas plant.

Nasser assured investors that the attacks didn’t result in injuries or fatalities. Also, the damages will not impact oil supplies heading to customers. 

Saudi Aramco Declares 4th Quarter Dividend of $18 Billion

In addition, the company also declared a fourth quarter dividend of $18.8 billion. Investors will receive their payout during the first quarter of 2022.

Aramco will also recommend converting $4 billion in retained earnings into additional shares for distribution to investors. Each investor will receive one bonus share for every ten shares held.  

The profits generated by the company in 2021 are a stark contrast to Saudi Aramco’s 2020 earnings. Due to the pandemic in 2020, the company reported a 44% drop in earnings compared to 2019.

Now, the oil firm will invest in expanding its crude oil production capacity to 13 million barrels per day by the year 2027.

Watch the Inside News video reporting that Saudi Aramco’s full year profit more than doubles on soaring oil prices:

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