Saudi Aramco, the state oil company of Saudi Arabia, reported a 288% increase in second quarter profit due to higher prices and a recovery in global energy demand.
Saudi Aramco’s second quarter net income of $25.5 billion U.S. compares to $6.6 billion U.S. in the same quarter of 2020. The result beat expectations, with analysts forecasting a median net income of $24.7 billion U.S. for the second quarter.
Net income for the first half of this year was $47.2 billion U.S., compared to $23.2 billion U.S. in the first half of 2020, representing a 103% increase. The Saudi oil giant also announced that it is maintaining its $18.8 billion U.S. dividend payout.
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.
Saudi Aramco said free cash flow was $22.6 billion U.S. in the second quarter and $40.9 billion U.S. for the first half of 2021, compared to $6.1 billion U.S. and $21.1 billion U.S., respectively, for the same periods in 2020.
This is significant because free cash flow has now risen above the quarterly dividend of $18.8 billion U.S. for the first time since the start of the pandemic. Saudi Aramco pays the world’s largest dividend.
Aramco, which is majority-owned by the Saudi Arabian government, is a key source of revenue for the Kingdom. Oil prices have surged 40% in 2021 to around $70 U.S. a barrel, prompting big oil rivals BP, Chevron and Royal Dutch Shell to hike their dividends and launch share buyback programs.
Saudi Aramco also said it reduced its gearing ratio, which is how much the company is funded by debt versus funded by shareholder equity, to 19.4% on June 30, down from 23% on December 31, 2020.
The decrease was due to higher cash and cash equivalents and stronger operating cash flows, as well as proceeds in connection with Saudi Aramco’s recent crude oil pipelines transaction.
Saudi Arabia’s Crown Prince Mohammed bin Salman said earlier this year that the Kingdom would sell more Aramco shares but the company did not comment on the plans in its second quarter results.
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