Soaring Oil Prices have Paid Off for Saudi Aramco

by Wall Street Rebel - Michael London | 05/15/2022 11:15 AM
Soaring Oil Prices have Paid Off for Saudi Aramco

Saudi Arabia's state-owned oil business Saudi Aramco, profits for the first quarter totaled $39.5 billion.


As a result of higher oil prices, Saudi Aramco, the country's state-owned oil company, reported a net profit of $39.5 billion for the first quarter of 2022 on Sunday. As the effects of the pandemic faded, demand for oil and natural gas increased, pushing up prices.

Aramco, which only recently overtook Apple Inc. to become the most valuable business in the world, reported bumper earnings for the first quarter, following in the footsteps of its Big Oil competitors such as Shell Plc and BP Plc. Following Moscow's strike at the end of February, the price of crude increased to $110 per barrel, which helped raise the earnings of the Saudi Arabian company along with those of its competitors.

In the wake of Russia's incursion into Ukraine in late February, sanctions have slashed Russian oil output and raised concerns about possible shortages.

Sanctions imposed on Russia due to its invasion of Ukraine at the end of February have led to a decrease in oil production there, heightening concerns about the possibility of shortages.

The overall situation is working to Saudi Aramco's advantage, as the company sees increased profits despite the rising energy cost.

Oil prices have nearly doubled over the past year, with Brent crude reaching $111 per barrel on Friday, up from approximately $60 per barrel in the spring of 2021.

In contrast to its Western counterparts, such as Shell and Exxon Mobil, which are subject to pressure from their shareholders to address the issue of global warming, the Saudi company is almost entirely owned by the government. It is therefore under much less pressure to reduce its output and its emissions of carbon dioxide.

Saudi Aramco and ADNOC, the national oil corporation of Abu Dhabi, believe that they can benefit from the pressure that is being placed on Western businesses.

"Against the backdrop of increased volatility in global markets, we remain focused on helping meet the world's need for energy," Amin H. Nasser, the chief executive of Aramco, said in a statement on Sunday that was released on the company's website.

The corporation decided to maintain its quarterly dividend at its previous level of $18.8 billion despite its free cash flow coming close to reaching $31 billion. Because of this, Aramco was able to lower its leverage. The ratio of debt to equity, measured by gearing, saw a decrease from 14 percent in December to 8 percent at the end of March. During the epidemic, the gauge climbed above 20 percent, and Aramco was forced to borrow more money due to the falling profits.

The price of oil increased by almost 45 percent this year. Still, Saudi Arabia and the other members of OPEC+ have also been gradually raising their production, which has been beneficial to Aramco. The kingdom's oil output increased by 20 percent year on year, coming in at an average of 10.2 million barrels per day during the month of January.

It is anticipated that production will continue to increase until at least September, when the current agreement between the Organization of Petroleum Exporting Countries and its partners, which comprises 23 nations and is led by the Saudis and Russia, will come to an end.

Mr. Nasser continued by saying, "We are investing for the long term, boosting our oil and gas production capacity to meet anticipated demand growth."

Despite this, Saudi Arabia has primarily disregarded requests from the United States government to accelerate a gradual production increase program agreed upon with OPEC and other oil producers during the summer of 2017. The rise in the price of gasoline has contributed to an increase in inflation.


                       Saudi Aramco is World's most valuable company | Business News | WION




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