Saudi Aramco posts $42.4bn third-quarter profit on higher oil prices

The company paid a dividend of $18.8bn for the period and plans to fork out the same amount in the fourth quarter

Saudi Aramco engineers at the Hawiyah natural gas liquids recovery plant in Hawiyah, in Saudi Arabia's Eastern Province. AP

Saudi Aramco, the world's largest oil-producing company, said its net profit surged 39 per cent in the third quarter, driven by higher crude prices and a positive long-term view for increased oil demand.

Net profit after zakat for the three-month period to the end of September rose to $42.4 billion, from $30.4bn a year ago, the state oil company said on Tuesday in a regulatory filing to Riyadh's Tadawul stock exchange, where its shares are traded.

That was the company's second-highest quarterly profit on record, after the $48.4bn it reported in the previous quarter.

The company paid a dividend of $18.8bn in the third quarter and plans to pay the same amount in the fourth quarter, it said.

“Aramco’s strong earnings and record free cash flow in the third quarter reinforce our proven ability to generate significant value through our low cost, low-carbon intensity upstream production and strategically integrated upstream and downstream business,” said president and chief executive Amin Nasser.

Oil prices have continued to rally this year after surging by more than 60 per cent in 2021, supported by economic rebounds across the world as Covid-19 restrictions have been gradually eased and the continuing Russia-Ukraine conflict that has stoked commodity prices.

Brent, the benchmark for two thirds of the world’s oil, is up more than 20 per cent so far this year. West Texas Intermediate, the gauge that tracks US crude, has risen almost 14 per cent since the start of the year.

Both benchmarks were up about 1.4 per cent at 12pm UAE time on Tuesday.

The price of Brent is forecast to average about $93 a barrel in the fourth quarter of 2022 and rise to $95 in 2023, the US Energy Information Administration (EIA) said in a report last month.

Factors that would lead to higher oil prices include any potential petroleum supply disruptions and slower crude production growth, while timid economic growth may contribute to lower prices, the EIA said.

This is lower than the International Monetary Fund's earlier forecast, which said the price of Brent would average $103.88 in 2022, its highest level since 2013, citing disruptions caused by the war in Ukraine.

Demand for oil is expected to continue to rise and the industry requires “huge investments” of about $12.1 trillion through 2045 to boost production and meet demand, even as the world moves to clean energy, Opec said last week.

Opec and its partners led by Russia, which together form the Opec+ alliance, agreed early in October to cut oil production by 2 million barrels per day from November to support the market.

That was the biggest reduction since the onset of the coronavirus pandemic in 2020.

Opec also lowered its forecasts, saying last month that global oil demand would rise by 2.6 million bpd in 2022, compared with its earlier projection of 3.1 million bpd, and grow by 2.3 million bpd next year, from an earlier call of 2.7 million bpd.

“While global crude oil prices during this period were affected by continued economic uncertainty, our long-term view is that oil demand will continue to grow for the rest of the decade, given the world’s need for more affordable and reliable energy,” Mr Nasser said.

Cash flow from operating activities grew by almost half to $54bn, from $36.3bn a year earlier, while free cash flow surged about 58 per cent to $45bn, from $28.7bn.

Aramco’s strong earnings and record free cash flow in the third quarter reinforce our proven ability to generate significant value through our low cost, low-carbon intensity upstream production and strategically integrated upstream and downstream business.

Amin Nasser,
president and chief executive of Saudi Aramco

Through the first nine months of 2022, Aramco’s net profit jumped more than two thirds to $130.3bn, from $77.6bn in the same period a year ago.

Aramco said its average realised oil price stood at $101.70 a barrel in the third quarter, up by about 40 per cent from $72.80 a year ago. For the first nine months, the average was at $104.30, up more than 55 per cent from $67.20 in the same period in 2021.

The company will continue to extend its long-term oil and gas production capabilities, while also working to achieve its net-zero goals, Mr Nasser said.

“Our plans for our downstream expansion continue to move forward as we seek to leverage the significant potential of our products to meet rising global demand for petrochemicals, which will be critical to the materials transition that is required to support a lower-carbon future,” he said.

“In addition, we continue to develop new, lower-carbon energy solutions as we work to be part of a more practical, stable and inclusive energy transition.”