Saudi Aramco profit soars 46% to record $161bn on higher oil prices

Company declares a $19.5bn dividend for the fourth quarter of 2022 to be paid in the first quarter of 2023

Aramco oil tanks in Abqaiq, Saudi Arabia. The state energy company will raise crude production to 13 million barrels per day by 2027. Reuters

Saudi Aramco, the world's largest oil-exporting company, said annual net profit surged 46 per cent in 2022, driven by higher oil prices.

Net profit for the 12 months to the end of December, increased to a record $161.1 billion, from $110 billion in 2021, the company said in a regulatory filing on Sunday to the Tadawul stock exchange, where its shares are traded.

Brent, the global benchmark for two thirds of the world's oil, soared to a notch under $140 a barrel in March last year, the highest in 14 years, after Russia’s military offensive in Ukraine.

However, sluggish economic growth in China and the strong possibility of a recession in several economies weighed on the market and dragged prices lower.

Despite the price volatility in 2022, Brent gained about 10 per cent, after jumping 50 per cent in 2021, while WTI ended up about 7 per cent higher last year, following a 55 per cent surge in 2021. Brent gained 1.46 per cent at the close of trading on Friday at $82.78.

Amin Nasser, president and chief executive of Aramco, said the company delivered "record financial performance in 2022, as oil prices strengthened due to increased demand around the world".

"We also continued to focus on our long-term strategy, building both capacity and capability across the value chain with the aim of addressing energy security and sustainability,” he said.

Aramco declared a dividend of $19.5 billion for the fourth quarter 2022, to be paid in the current quarter. This represents a 4 per cent increase compared to the previous quarter. The company's board also recommended the distribution of bonus shares to eligible shareholders in the amount of one share for every 10 shares held, subject to required the extraordinary general assembly and regulatory approvals.

As of the close of trading on Thursday in Saudi Arabia, Aramco, the most profitable company in the world, had a market value of $1.92 trillion — second only to Apple.

"Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real — including contributing to higher energy prices," Mr Nasser said.

"To leverage our unique advantages at scale and be part of the global solution, Aramco has embarked on the largest capital spending programme in its history.

"Our focus is not only on expanding oil, gas and chemicals production, but also investing in new lower-carbon technologies with potential to achieve additional emission reductions — in our own operations and for end users of our products.”

Aramco's free cash flow was $148.5 billion last year, compared to $107.5 billion in 2021. Its gearing ratio, a measure of debt to equity, decreased 7.9 per cent last year, compared to 12 per cent at the end of 2021.

The company said capital expenditure rose 18 per cent to $37.6 billion last year, from 2021, due to continuing crude oil increments and other development projects.

Aramco will raise crude oil production to 13 million barrels per day by 2027 and potentially increase gas production by more than 50 per cent by 2030 as part of its growth strategy.

The company continues to expand its downstream business to meet anticipated future demand.

Aramco expects 2023 capital expenditure to of between $45 billion and $55 billion, with the amount increasing until about the middle of the decade. The company said it had average hydrocarbon production of 13.6 million barrels per day of oil equivalent last year, including including 11.5 million barrels per day of total liquids.

As part of the oil company's investment to expand capacity to 13 million bpd, Aramco is adding to its gas-processing capacity and eliminating liquid-burning in the kingdom.

In 2021, Aramco announced its plans to target net-zero carbon emissions by 2050 after the kingdom said it aimed to neutralise its emissions by 2060.

Oil prices could rise to as high as $107 a barrel by the end of 2023 from about $80 at present, depending on Opec's response to market conditions, Goldman Sachs said in a report on Friday.

At the end of 2022, Opec cut output by two-million-barrels-a-day as the global economy was slowing down and the risks of recession increased.

But China, the world's biggest energy importer, has reopened its economy and a full recovery in the country's domestic demand may raise global gross domestic product by about one per cent in 2023 and lead to a rally in oil prices, Goldman Sachs said in a separate report last month.

"Increased demand from China combined with little increase in non-Opec production this year will likely lead Opec to reverse its strategy at its June meeting and increase production by one million barrels a day," the investment bank said in its report last week.

This will push prices for Brent crude to about $90 a barrel in the second quarter, before rising gradually to $100 by year's end, it said.

Last month, Opec raised its 2023 oil demand forecast by 100,000 bpd amid expectations of an economic rebound in China.

The group expects global oil demand to grow by 2.3 million bpd this year, which is higher than its previous growth estimate of 2.2 million bpd.

Last week, Opec Secretary General Haitham Al Ghais said he was “cautiously optimistic” on China's reopening, but warned that a slowdown in the US and the EU could dampen crude oil demand in 2023.

China alone will account for about 500,000 bpd to 600,000 bpd of the demand improvement, he said.