Stock Saudi Aramco
Saudi Aramco's latest round of results puts the buzz back on its medium-term plans. Image Credit: AFP

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.

We made further progress towards our strategic objectives during the quarter and our portfolio
optimization program continues to identify value creation opportunities, such as the recent
announcement of our landmark $12.4 billion pipeline infrastructure deal.

- Amin H. Nasser, CEO and Aramco President

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 per cent 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.

Gearing Unchanged

Gearing, a measure of net debt to equity, increased from minus 5 per cent in early 2020 to 23 per cent 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.