Dhahran: The Saudi Arabian Oil Company (Aramco) announced its financial results for the second quarter of 2022, posting a 90% year-on-year (YoY) increase in net profit and declaring an 18.8 billion dividend dollars to be paid in the third quarter.
The results set a new quarterly profit record for the company since its IPO in 2019, and were mainly driven by higher crude oil prices and volumes sold, as well as higher refining margins.
Aramco posted 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 in the second quarter and downstream margins higher in the first half of 2022.
Free cash flow increased 53% to $34.6 billion in the second quarter and stood at $65.2 billion in the first half of 2022, from $22.6 billion and $40.9 billion dollars, respectively, for the same periods in 2021. This increase is mainly due to an increase in cash provided by operating activities.
Return on average capital employed (ROACE) for the second quarter and six months ended June 30, 2022 was 31.3%, compared to 16.7% for the same periods in 2021, reflecting higher oil prices gross and volumes sold, and improved downstream margins.
The Company continues to strengthen its balance sheet to maintain a superior credit rating through market cycles. The debt ratio was 7.9% as of June 30, 2022, compared to 14.2% as of December 31, 2021, mainly due to higher operating cash flow, mainly reflecting stronger earnings, as well as the improved downstream margins.
Funding costs continue to be optimized and the Company made a partial prepayment to the Public Investment Fund of debt related to the Company’s acquisition of a 70% stake in SABIC in 2020. This reduced principal amounts of outstanding promissory notes of $12 billion, in addition to the reduction of $8 billion in the first quarter of 2022.
Aramco declared a second quarter dividend of $18.8 billion, to be paid in the third quarter of 2022. In addition, and as previously reported in its 2021 annual report, the company distributed bonus shares to shareholders in the second quarter of 2022. , on the basis of one share for every 10 shares held. Aramco aims to maintain a sustainable and progressive dividend in line with future prospects and underlying financial results.
Capital expenditure increased 25% to $9.4 billion in the second quarter and 8% to $16.9 billion for the first half of 2022, compared to the same periods in 2021. Aramco continues to invest to seize growth opportunities, advancing the strategic integration of its upstream and downstream operations, the expansion of its chemicals business and the development of prospects in low-carbon businesses.
The Company also demonstrated its reliable upstream performance, with an average total hydrocarbon production of 13.6 million barrels of oil equivalent per day in the second quarter of 2022. The Company continues to work on increasing its sustainable capacity crude oil peak from 12 million barrels of oil per day to 13 million barrels of oil per day by 2027.
Aramco continued its strong track record of reliable supply, achieving 99.8% 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 increased production with the initial construction and design of the Jafurah gas plant underway. The facility has a planned processing capacity of 3.1 billion standard cubic feet per day (bscfd) of raw gas, which is expected to be completed in two phases by 2027. The Jafurah field is expected to begin 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 help meet projected growing local energy demand.
Commenting on the results, Aramco Chairman and Chief Executive Officer Amin H. Nasser said, “Our record second quarter results reflect growing demand for our products, particularly as a low-cost producer with the one of the lowest upstream carbon intensities in the industry.”
“While global market volatility and economic uncertainty remain, events in the first half of this year reinforce our view that continued investment in our industry is essential, both to ensure markets remain well supplied and to facilitate an orderly energy transition.
“In fact, we expect oil demand to continue to grow for the remainder of the decade, despite downward economic pressures on near-term global forecasts.
“But while there is a very real and present need to preserve security of energy supplies, climate goals remain essential, which is why Aramco is working to increase production from multiple energy sources – including oil and gas, as well as renewables and blue. hydrogen.
“We are moving forward with the largest investment program in our history, and our approach is to invest in the reliable energy and petrochemicals the world needs, while developing low-carbon solutions that can contribute to a broader energy transition.”
Meanwhile, the construction of the Hawiyah Unayzah gas storage reservoir 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. This is the first underground natural gas storage project in the Kingdom, which helps manage seasonal changes in demand and in turn improves asset utilization. and profitability.
Aramco has successfully deployed the Ghawar-1 supercomputer for reservoir simulation. It is the second largest supercomputer in the MENA region and is expected to increase the number of completed simulation runs, allowing Aramco to explore more opportunities within its existing resources.
Most recently, the company announced a stock purchase agreement to acquire the global products business of Valvoline Inc. (Valvoline Global Products) for $2.65 billion. This strategic acquisition will complement Aramco’s premium branded lubricants product line, optimize its global base oil production capabilities and expand its own R&D activities and OEM partnerships. The transaction is subject to customary closing conditions, including receipt of regulatory approvals.
SABIC’s integration into Aramco is progressing ahead of schedule and the company continues to leverage synergies in many areas, including sourcing, flow integration, raw material optimization and maintenance activities, among others. Aramco has also finalized the transfer of PRefChem polymers and monoethylene glycol offtake rights to SABIC.
In May, Aramco’s refining and petrochemical joint ventures with PETRONAS in Malaysia, known collectively 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 opportunity to expand into an important growing market and provide new geographies for its crude oil production.
On June 15, Aramco released its first Sustainability Report, which outlines the means by which the company plans to achieve net Scope 1 and 2 greenhouse gas emissions across all of its assets. wholly-owned by 2050. Goals outlined in the report include capturing, using, or storing 11 million tonnes of CO2 equivalent per year by 2035; investing in renewable energy that aims to generate 12 gigawatts of solar and wind power by 2030; reduce or mitigate more than 50 million metric tons of CO2 equivalent per year by 2035, and reduce upstream carbon intensity by at least 15% by 2035 compared to a 2018 baseline. In addition, the Company aims to produce 11 million tonnes of blue ammonia, a hydrogen carrier, per year by 2030.
To accelerate the development of low-carbon solutions in the energy sector, Aramco on June 27 inaugurated the Aramco Research Center at King Abdullah University of Science and Technology, which uses artificial intelligence and technology. machine learning to develop innovative ways to enable a circular carbon economy. .
Aramco also announced a major expansion of its Namaat industrial investment program with 55 agreements and MoUs now in place across the sustainability, digital, industrial, manufacturing and social innovation sectors. , aimed at creating jobs and expanding the Kingdom’s energy and chemical value chains. . Through Namaat, Aramco seeks to localize its supply chain and secure long-term leadership, sustainability and resilience in cost and productivity.