By
Bhushan Akolkar
August 7th, 2023
Amid global economic reopening, strong demand, and fuel scarcity, Saudi Aramco finds itself in a sweet spot with its median net income shooting nearly 3 times over the last year.
World’s largest oil-producing giant Saudi Aramco (TADAWUL: 2222) has announced a staggering 158% surge in its net income for the third quarter (Q3) of 2021. The company reported a net income of $30.4 billion as oil companies benefit majorly from global economic reopening.
The results are also in tune with analysts’ expectations with a median net income of $29.1 billion. The recent income is nearly 3 times the income reported by the company in the same quarter last year. Also, this surge in net incomes comes on the backdrop of higher crude oil prices and growing sales.
Further, as economic activity shoots, Saudi Aramco also benefits from the growing economic demand. Speaking of the development on Sunday, October 31, Aramco President and CEO Amin Nasser said:
“Our exceptional third-quarter performance was a result of increased economic activity in key markets and a rebound in energy demand. Some headwinds still exist for the global economy, partly due to supply chain bottlenecks, but we are optimistic that energy demand will remain healthy for the foreseeable future”.
This has been a bumper quarter for the “Big Oil” companies across the world. The US oil giants like Chevron and ExxonMobil are also benefitting majorly from the rising prices. These companies have reported profits at multi-year highs. Also, Royal Dutch Shell has reported record cash flows during the last quarter.
WTI Crude Price Touches 6-Year High
In recent weeks, the price of WTI crude has surged to a staggering $85, last seen during 2014. This happens against the backdrop of demand recovery as well as supply shortage. Furthermore, the natural gas prices have already shot up 130% this year.
Analysts expect that the global energy crisis will depend further by the fourth quarter of this year. But amid a staggering Q3 2021, Saudi Aramco plans to disburse a dividend of $18.8 billion to its shareholders in the upcoming quarter.
The jump in free cash flow to $28.7 billion in Q3 2021 will help in the dividend payout. The free cash flow of the company has more than doubled in comparison to $12.4 billion in Q3 2020. Besides, the oil giant has already declared that it would “invest for the future” announcing a capital expenditure of $7.6 billion for Q3 2021.
The oil sector has been facing strong criticism over its climate ambitions. However, Saudi Aramco announced some key climate initiatives just days before the COP26 climate summit. But it simultaneously plans to increase its oil production in the coming years. In an email to CNBC, Aramco Chairman Yasir Al-Rumayyan wrote:
″I think most people would agree that climate change is one of the biggest challenges facing society. We need a transition that does not ignore that petrochemicals are essential building blocks to modern life — including the smartphones we all use and the products we rely on to fight COVID”.
The oil giant is planning for net-zero emissions for its operations over the next three decades by 2050. The company will announce further details of these transitions in its Sustainability Report of Q2 2022.
“Recent energy disruptions around the world are evidence of the need for a stable and inclusive energy transition. We need a transition that provides a reliable, affordable and low-cost supply of energy that leaves no one behind,” Rummayyan said.