Saudi Aramco’s 1st quarter profit down about a fifth to US$31B

DUBAI, United Arab Emirates –

Oil big Saudi Aramco reported a first-quarter revenue on Tuesday of US$31.88 billion, down practically 20 per cent from the identical interval final 12 months as power costs have sunk over international recession issues.

The agency recognized formally because the Saudi Arabian Oil Co. blamed the drop — in comparison with $39.47 billion in the identical quarter final 12 months — on the decrease crude oil costs. Aramco made a $30.73 billion revenue within the fourth quarter of final 12 months.

“We continue to deliver high reliability and low cost of production financially,” Aramco President and CEO Amin H. Nasser mentioned on a convention name with analysts. “We continue to generate strong earnings and cash flows further, demonstrating our ability to deliver through oil price cycles.”

Benchmark Brent crude traded Tuesday round $76 a barrel, down from a excessive of $125 within the final 12 months.

Saudi Arabia’s huge oil sources, situated near the floor of its desert expanse, make it one of many world’s least costly locations to supply crude. For each $10 rise within the value of a barrel of oil, Saudi Arabia stands to make an extra $40 billion a 12 months, in response to the Institute of International Finance.

In March, Aramco introduced incomes $161 billion final 12 months, claiming the highest-ever recorded annual revenue by a publicly listed firm and drawing instant criticism from activists amid issues about local weather change. However, as costs drop, so do Aramco’s revenues.

“Aramco is a very simple machine: It’s oil production times price, minus a little bit of cost,” mentioned Robin Mills, the CEO of Qamar Energy, a Dubai-based consulting firm. “Profit is down. That’s all oil-price driven.”

While saying Aramco was “working to further reduce the carbon footprint of our operations,” Nasser remained bullish on the world’s want for fossil fuels, citing future estimated demand from China and India.

“We continue to believe that oil demand is likely to grow, and we believe that the world will continue to need oil and gas for the foreseeable future to support a sustainable and affordable energy transition,” Nasser mentioned. “Our concern remains that the industry is not investing enough to meet expected future demand.”

Nasser mentioned Aramco additionally was taking a look at alternatives to supply liquid pure fuel exterior of the dominion in “the U.S. and Australia and in other parts of the world.” The firm additionally plans to spend as much as $55 billion in capital tasks as effectively to broaden its manufacturing.

Those earnings got here off the again of power costs rising after Russia launched its warfare on Ukraine in February 2022, with sanctions limiting the sale of Moscow’s oil and pure fuel in Western markets.

However, oil costs have sunk in current weeks amid fears of a coming recession as central banks within the U.S. and elsewhere increase rates of interest to attempt to tame inflation. That’s even after OPEC+, a bunch of nations together with the cartel and people exterior it like Russia, introduced shock manufacturing cuts in April totaling as much as 1.15 million barrels. Recent OPEC+ cuts have seen U.S. President Joe Biden warn of potential “consequences” for Riyadh, though his nationwide safety adviser simply visited the dominion and met with Saudi Crown Prince Mohammed bin Salman.

“In our view, the recent weakness seen in the oil market was driven by concern over tightening of monetary policy by central banks and (the) effect on economies,” Nasser mentioned. “This was also worsened by the crisis (involving) regional banks in the U.S. and concern over its contagion effect. However, in our view, the markets overreacted to the situation, resulting in the sell-off by traders.”

Aramco inventory rose 3% in buying and selling Tuesday to shut at $8.96, giving the oil agency a $1.97 trillion valuation and placing it solely behind Apple and Microsoft for the very best market capitalization on this planet. Just a sliver of its price, underneath 2%, is traded on the trade. The Saudi authorities holds 90% of the corporate, with about 8% held by Saudi sovereign wealth funds.

Separately Tuesday, Aramco introduced it could start issuing performance-based dividends to stockholders, on prime of the dividends it already gives. Its base dividend within the fourth quarter of final 12 months was $19.5 billion, rating it as the very best on this planet for a publicly traded agency.