Saudi Aramco’s quarterly profits increase by nearly a third

Saudi Aramco reported a 30% increase in first-quarter profits as higher oil prices, improved refining and chemicals margins offset lower production.

Saudi Arabia’s state energy group said net income for the three months ending March 31 was $ 21.7 billion, up from $ 16.7 billion in the same quarter a year ago , while the coronavirus pandemic had taken hold in the world. That beat analysts’ forecast by $ 19.4 billion.

“Given the positive signs of energy demand in 2021, there is more reason to be optimistic about the brighter days approach,” said Amin Nasser, Managing Director. “And while some headwinds remain, we are well positioned to meet the world’s growing energy needs as economies begin to recover.”

Free cash flow for the quarter was $ 18.3 billion, which was not quite enough to cover the dividend the company will pay for the three-month period – largely to the government. – $ 18.8 billion.

Saudi Aramco, like other publicly traded oil majors, has benefited greatly from the rebound in oil prices as demand recovers and producers of Opec led by the kingdom, the world’s largest exporter, limit l offer to support the markets. Saudi Arabia’s crude oil production averaged 8.6 million barrels per day in the first quarter, down from 9.8 MB / day a year ago.

But as its peers have cut dividends, Saudi Aramco has come under increased pressure to maintain large payments to the state, of which it is the largest producer of income.

The company has pledged to pay the bulk of the $ 75 billion in annual dividends to the government, along with taxes and royalties, and it is also expected to lead a new national investment plan to modernize Saudi Arabia.

Saudi Aramco is also monetizing its assets to raise funds as the country’s economy recovers from the financial fallout from the coronavirus crisis.

Saudi Aramco said last month it had agreed to raise $ 12.4 billion through the sale of a minority stake in a new pipeline company to a consortium of investors.

As the financial pressure intensified, the company sharply reduced its capital expenditure. He expects the figure for 2021 to be around $ 35 billion, which is significantly lower than the $ 40-45 billion forecast. Saudi Aramco has also delayed projects, suspended drilling in some areas and blocked some transactions.

Borrowing has also increased as the company was forced to absorb the $ 69 billion acquisition of a controlling stake in Sabic, the Saudi chemical company, from the kingdom’s public investment fund at a time of crisis in Treasury.

Gearing, which Saudi Aramco defines as a measure of the degree of financing of debt operations, fell from minus 4.9% in the first quarter of 2020 to 23% in December. It has maintained this level over the most recent three-month period.