Saudi oil company Saudi Aramco reported a 30% surge in net profit on Tuesday, a sign of continued recovery from last year’s oil market crash that saw the state-owned company’s full annual earnings drop.
In a report released on Tuesday, the company said profit had risen to $ 21.7 billion in the first three months of the year, from $ 16.6 billion over the same period last year.
Beating Estimations
It has shattered other analysts’ estimates of $ 17.24 billion, despite lower oil production in February and March. This figure is approaching the level of corporate income of the oil giant in the first quarter of 2019, which was $ 22.2 billion.
The company said free cash flow in the first quarter of 2021 was $ 18.3 billion, up from $ 15 billion over the same period last year.
Saudi Arabia’s Behemoth oil producer Aramco also announced a dividend, with $ 18.8 billion to be paid in the first and second quarters.
Dividend Pay Out
Aramco was forced to cut costs over the past year as the coronavirus reduced oil prices, and “continues to scrutinize its value-added marketing programs,” said Ellen Wald, president of Transversal Consulting and author of “Saudi, Inc.”
“It cannot be ignored that the massive dividend commitment and the need to fund the Saudi government budget are weights on the company,” Wald told CNBC on Monday. “That doesn’t mean Aramco isn’t well positioned, but no other major oil company has to deal with these burdens.”
“Aramco maintains this because it has the cheapest cost of oil production in the world, has the largest oil reserves and is well managed,” she added. “It is committed to paying the share of dividend because the share is paid to the people of Saudi Arabia who own equity.”
Oil Prices Recover
The earnings reflect a dramatically improved climate for oil markets since the first quarter of last year, when Aramco reported a 25% fall in net income as it grappled with the initial fallout of the pandemic and cratering global demand.
Aramco, like its global counterparts, has been navigating the havoc created by the volatile oil price environment and unpredictable global economic recovery. The company has described 2020 as “the most difficult year” in its history, and it is now benefiting from the availability of oil markets, with Brent’s international commodity prices almost double than what they were last year. The Refining and chemicals margins are also beginning to improve.
“The momentum provided by the global economic recovery has strengthened energy markets,” Aramco President and CEO Amin Nasser said Tuesday in a company press release. He added that “some headwinds still remain,” but said: “Given the positive signs for energy demand in 2021, there are more reasons to be optimistic that better days are coming.”
