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Saudi Aramco says its Q1 2022 net profit increased 80%, aided by rising crude prices, higher volumes sold, and improved downstream margins.
Saudi Aramco (TADAWUL: 2222) posted its Q1 2022 earnings report showing an impressive 80% increase in net profit. The increase exceeded analysts’ expectations and set a new quarterly earnings record for the oil giant, the largest since its IPO.
According to Aramco, net income surged 82% to $39.5 billion for the period ended March 31st. This figure represents an increase of around $17.8 billion year-over-year (YoY) amid soaring global oil prices. Since 2022 began, prices in the oil and gas sector have climbed 45% as investors currently favor the industry over tech.
According to Reuters, analysts polled by Aramco had the company’s Q1 2022 net income at $38.5 billion.
Saudi Aramco CEO Comments on Q1 2022 Report
Speaking on the Aramco report released on Sunday, CEO Amin Nasser credited improved downstream margins as part of the reasons for the net profit increase. According to Nasser, who is also president of the Middle Eastern oil giant:
“During the first quarter, our strategic downstream expansion progressed further in both Asia and Europe, and we continue to develop opportunities that complement our growth objectives.”
In addition, Nasser also added:
“Against the backdrop of increased volatility in global markets, we remain focused on helping meet the world’s demand for energy that is reliable, affordable, and increasingly sustainable.”
Apart from rising crude prices and improved downstream margins, Aramco also benefited from higher volumes sold. As a result, the Dhahran-based public petroleum and natural gas company seeks to reward its investors. According to Aramco, it would use $4 billion in retained earnings to distribute bonus shares to shareholders. This would amount to one share for every 10 shares held.
Oil Beats Tech
Aramco surpassed American tech giant Apple (NASDAQ: AAPL) last week as the world’s most valuable company. Officially called the Saudi Arabian Oil Company, the oil giant seized the honors with a market cap of approximately $2.43 trillion. Furthermore, the Aramco also saw a big boost by a 15% year-to-date increase in its stock price at the time. However, as of Sunday, the market caps of both companies were not far apart.
The oil and gas sector has enjoyed investor sentiment in recent times, which has seen prices climb. The increase is due to different but interwoven factors ranging from the war in Ukraine to inflation in the US. Other factors include Europe’s looming sanctions on Russian oil and the possibility of tighter supply.
Oil and gas firms like Shell and BP have seen their earnings surge to their highest levels in ten years or more. In addition, these lofty earnings come despite the fact that many of these energy companies incurred write-downs from exiting Russia.
Brent crude prices were 70% up YoY at the end of the first quarter to $107.9. According to Yousef Husseini, associate director for equity research at EFG Hermes, “our view is Brent will end up lower in the second half of the year and so we are expecting (Aramco) earnings to pull back and for the second quarter to be a peak.”