Saudi Aramco’s profit soared in the first quarter following a recovery in global oil and gas markets, allowing the state-owned company to maintain its dividend.
The world’s biggest energy firm kept its quarterly payout, almost all of which goes to the Saudi Arabian government, at $18.8 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.
Commenting on the results, Aramco President & CEO Amin H. Nasser, said: “The momentum provided by the global economic recovery has strengthened energy markets, and Aramco’s operational flexibility, financial agility and the resilience of our employees have contributed to a strong first quarter performance. For our customers we remain a supplier of choice, and for our shareholders we continue to deliver an exceptional quarterly dividend.”
The bumper results follow those last week of Big Oil firms such as Royal Dutch Shell Plc and BP Plc, whose earnings are back to pre-pandemic levels.
Aramco’s adjusted net income for the quarter was 78.6 billion riyals ($21 billion), up 24 percent year-on-year and higher than analysts’ estimates of roughly $18 billion. Free cash flow was $18.3 billion, almost rising to the level of the dividend.
The company, based in Dhahran in eastern Saudi Arabia, is seeking to reduce a debt load that spiked last year as earnings collapsed and it opted to maintain the $75 billion annual dividend.
“Given the positive signs for energy demand in 2021, there are more reasons to be optimistic that better days are coming. And while some headwinds still remain, we are well-positioned to meet the world’s growing energy needs as economies start to recover,” Nasser said.
Gearing Unchanged
Gearing, a measure of net debt to equity, increased from minus 5 percent in early 2020 to 23 percent by the end of the year. It remained at that level at the end of March, but should fall in this quarter after Aramco’s announcement last month that a U.S.-led group will invest $12.4 billion in its oil pipelines. It is also considering a sale of a stake linked to its natural-gas pipelines.
Aramco’s downstream business, which now includes contributions from chemicals maker Saudi Basic Industries Corp., swung to a profit as higher commodity prices boosted margins for refined products. Earnings before interest and tax for the unit were $4.4 billion, compared to a loss of $5 billion a year earlier.
The downstream arm, which Aramco wants to expand, made full-year losses in 2019 and 2020. The company bought Sabic from the Saudi sovereign wealth fund for $69 billion last year, the main reason its debt rose so much.
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