"Aramco posts nearly 300% leap in second-quarter profit on global demand recovery"

" \n Aramco posts nearly 300% leap in second-quarter profit on global demand recovery \n \n\n \n Saudi state oil giant Aramco reported a stunning 288% increase in net income to $25.5 billion for the second quarter, while maintaining its dividend of $18.8 billion, as big oil benefits from higher prices and a recovery in worldwide demand.\u00a0 \n \n\n \n Aramco\u2019s net income of $25.5 billion for the quarter compares to\u00a0$6.6 billion in the same quarter of 2020. The result beat expectations, with analysts expecting a median net income of $24.7 billion for the quarter.\u00a0 \n \n\n \n \u201c Our second quarter results reflect a strong rebound in worldwide energy demand and we are heading into the second half of 2021 more resilient and more flexible, as the global recovery gains momentum,\u201d Aramco president and CEO Amin Nasser said in a company statement published Sunday. \n \n\n \n Aramco said net income for the first half of the year was $47.2 billion,\u00a0compared to $23.2 billion in the first half of 2020, representing a 103% increase. The company said the results were supported by the global easing of Covid-19 restrictions, vaccination campaigns, stimulus measures and accelerating activity in key markets.\u00a0 \n \n\n \n \u201c While there is still some uncertainty around the challenges posed by Covid-19 variants, we have shown that we can adapt swiftly and effectively to changing market conditions,\u201d Nasser said. \n \n\n \n Dividend plans \n \n\n \n Aramco said free cash flow was $22.6 billion in the second quarter and $40.9 billion for the first half of 2021, compared to $6.1 billion and $21.1 billion, respectively, for the same periods in 2020.\u00a0 \n \n\n \n This is significant, because free cash flow has now risen above the quarterly dividend of $18.75 billion for the first time since the start of the pandemic. Aramco already pays the world\u2019s largest dividend, but the improving outlook has prompted some analysts to call for higher payouts. \n \n\n \n \u201cA dividend increase is needed to stay competitive,\u201d BofA analysts said in a research note ahead of the earnings release. \u201cHigher oil prices and OPEC+ driven production increases should support a significant free cash flow increase over the next couple of years,\u201d it added. \n \n\n \n Aramco responded by saying its dividend is staying at the \u201cnormal level\u201d for the quarter, but it would \u201cadvise later\u201d as to whether it would stick to the current payout plan.\u00a0 \n \n\n \n Read: World Bank\u2019s IFC invests $100 million in Egypt\u2019s first private sector green bond \n \n\n \n \u201cWe are looking at our sustainability program,\u201d Nasser told CNBC on Sunday\u2019s earnings call. \u201cA lot of the elements of our capital program that we are currently considering have to do with crude-to-chemical and hydrogen, and all of these programs represent great opportunities, especially with the\u00a0Shareek program,\u201d he added. \n \n\n \n Aramco, which is majority-owned by the Saudi Arabian government, is a key source of revenue for the kingdom. \u201cAll of this will be reviewed with our board, and we will decide at a later date regarding any additional dividend distribution,\u201d Nasser said. \n \n\n \n Price Outlook \n \n\n \n Oil prices \u00a0have surged around 40% in 2021 to around $70 a barrel, prompting big oil rivals\u00a0 BP ,\u00a0 Chevron \u00a0and\u00a0 Royal Dutch Shell \u00a0 to hike dividends and launch share buyback programs.\u00a0 \n \n\n \n \u201cOur expectation is that the recovery will continue,\u201d Nasser said. \u201cWe are seeing more openings of economies, and we expect by year-end the demand will be around 99 million barrels\u2026 and 100 million barrels next year as a forecast for total demand,\u201d he added. \n \n\n \n Aramco also said it reduced its gearing ratio \u2014 essentially the ratio of how much the company is funded by debt versus funded by shareholder equity \u2014 to 19.4% on June 30, down from 23% on December 31, 2020. The decrease was primarily due to higher cash and cash equivalents and stronger operating cash flows, as well as proceeds in connection with Aramco\u2019s recent crude oil pipelines transaction. \n \n\n \n \u201cOur historic $12.4 billion pipeline deal was an endorsement of our long-term business strategy by international investors, representing significant progress in our portfolio optimization program,\u201d Nasser said. \n \n\n \n Capital expenditure was $7.5 billion in the second quarter and $15.7 billion for the first half of 2021, representing an increase of 20% and 15%, respectively. Aramco said 2021 capital expenditure was expected to be approximately $35 billion. \n \n\n \n Saudi Arabia\u2019s Crown Prince Mohammed bin Salman said the kingdom would\u00a0 sell more Aramco shares \u00a0earlier this year, but the company did not comment on the plans. Aramco also stopped short of commenting on a previously flagged oil-to-chemicals deal with Indian conglomerate Reliance Industries, which was expected to be formalized sometime this year. \n \n\n \n \u201cWe continue to move forward on a number of strategic programs, which focus on sustainability and low-carbon fuels, maximizing the value of our assets, and advancing our downstream integration and expansion journey,\u201d Nasser added. \n \n\n \n \u201cFor all these reasons and more, I remain extremely positive about the second half of 2021 and beyond.\u201d \n "

"Aramco posts nearly 300% leap in second-quarter profit on global demand recovery"

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