Aramco’s Q2 net income surges 90% to $48.4 billion

Dhahran: The Saudi Arabian Oil Company (Aramco) reported a 90 per cent year-on-year increase in net income in Q2 2022, and declared a dividend of $18.8 billion to be paid in the third quarter.

The results set a new quarterly earnings record for the company since its initial public offering in 2019, and were primarily driven by higher crude oil prices and volumes sold, and higher refining margins.

“Our record second-quarter results reflect increasing demand for our products — particularly as a low-cost producer with one of the lowest upstream carbon intensities in the industry,” said Aramco President & CEO Amin H. Nasser.

“While global market volatility and economic uncertainty remain, events during the first half of this year support our view that ongoing investment in our industry is essential — both to help ensure markets remain well supplied and to facilitate an orderly energy transition.”

Aramco achieved a record quarterly and half-year net income of $48.4 billion in the second quarter and $87.9 billion in the first half of 2022, compared to $25.5 billion and $47.2 billion, respectively, for the same periods in 2021. The increase in both periods was primarily driven by higher crude oil prices and volumes sold, as well as strong refining margins during the second quarter and higher downstream margins in the first half of 2022.

Free cash flow increased by 53 per cent to $34.6 billion in the second quarter and was $65.2 billion during the first half of 2022, compared to $22.6 billion and $40.9 billion, respectively, for the same periods in 2021. This increase was mainly driven by higher cash from operating activities.

Return on average capital employed for the second quarter and half year ended June 30, 2022, was 31.3 per cent, compared to 16.7 per cent for the same periods in 2021, reflecting stronger crude oil prices and volumes sold, and improved downstream margins.

Capital expenditure increased by 25 per cent to $9.4 billion in the second quarter and by 8 per cent to $16.9 billion for the first half of 2022, compared to the same periods in 2021.

Operational highlights

The company also demonstrated reliable upstream performance, with average total hydrocarbon production of 13.6 million barrels of oil equivalent per day in the second quarter of 2022.

Aramco achieved 99.8 per cent reliability in the delivery of crude oil and other products in the second quarter of 2022.

The company’s gas expansion program is progressing towards increasing production with initial construction and design of the Jafurah Gas Plant ongoing. The facility has a planned processing capacity of 3.1 billion standard cubic feet per day (bscfd) of raw gas, expected to be completed in two phases by 2027. The Jafurah field is expected to commence production in 2025 and will gradually increase natural gas deliveries to reach a sustainable rate of 2.0 bscfd by 2030, which will provide feedstock for hydrogen and ammonia production and will help meet expected growing local energy demand.

Meanwhile, construction of the Hawiyah Unayzah Gas Reservoir Storage has reached an advanced stage, with the injection phase nearing completion. This is expected to provide up to 2.0 bscfd of natural gas to be injected into the Master Gas System by 2024. It is the first underground natural gas storage project in the Kingdom, which helps to manage seasonal changes in demand and in turn improves asset utilization and cost efficiency.

Most recently, the company announced an equity purchase agreement to acquire Valvoline Inc.’s global products business (Valvoline Global Products) for $2.65 billion.

In May, Aramco’s refining and petrochemical joint ventures with PETRONAS in Malaysia, collectively known as PRefChem, started operations and will reach full capacity of 300,000 barrels per day by the end of the year. Aramco’s investment in PRefChem provides an expansion opportunity in an important growth market and offers new geographies for its crude oil production.

Aramco also announced a major expansion of its Namaat industrial investment program with 55 agreements and Memoranda of Understanding now in place across the sustainability, digital, industrial, manufacturing, and social innovation sectors, aiming to create jobs and expand te Kingdom’s energy and chemicals value chains. Through Namaat, Aramco seeks to localise its supply chain and ensure its long-term cost and productivity leadership, sustainability, and resilience.