Saudi Aramco income knocked by lower oil prices

12 August 2019
Saudi Arabia's national oil company ready for initial public offering as it reports half-year profits of $46.9bn

Saudi Arabia's national oil company Saudi Aramco has reported an 11.5 per cent year-on-year fall in profits for the first half of 2019 as a result of lower oil prices.

Announcing its half-year financial results for the first time on 12 August, the state-owned oil company reported a net income of $46.9bn for the first six months of 2019, down 11.5 per cent on the $53bn it recorded for the same period in 2018, which was boosted by higher oil prices.

The company's half-year earnings before interest and tax were $92.5bn, down from $101.3bn in 2018.

The state-run oil company revealed that its free cash flow was $38bn in the first half of 2019, compared with $35.6bn for the same period last year.

Aramco's capital expenditure was $14.5bn in the first six months of 2019, compared with $16.5bn for the same period in 2018.

Fiscal discipline

“Despite lower oil prices during the first half of 2019, we continued to deliver solid earnings and strong free cash flow underpinned by our consistent operational performance, cost management and fiscal discipline," said Saudi Aramco president and CEO Amin Nasser.

In April 2019,  Aramco published details of its financial performance for the first time as it prepared to raise $12bn on the international capital markets in one of the most oversubscribed bond issuances in history.

Prior to the bond sale, Aramco disclosed that it made $111.1bn of profits in 2018, making it the most profitable company in the world.

US tech giant Apple recorded a net income of $50.6bn in 2018, while international oil major UK/Dutch Shell Group announced profits in 2018 of $23.4bn.

“Disclosing our financial results for the first time, as part of our $12bn debut international bond issuance, marked a significant milestone in Saudi Aramco’s history," said Nasser.

Announcing the 2019 half-year figures on 12 August, Aramco said that it grew its trading business and scaled up innovation efforts through initiatives such as crude-to-chemicals, non-metallic materials manufacturing and hydrogen fuels.

“We demonstrated our reliability with near 100 per cent delivery on our customers’ requirements for oil and refined products, maintaining our total hydrocarbon production of 13.2 million barrels of oil equivalent per day and an average daily crude production of 10 million barrels per day," said Nasser.

“Leveraging our strength in upstream, we continued to deliver on our downstream growth strategy, including acquisitions in both Saudi Arabia and key international markets,” he said.

Aramco ready for IPO

Speaking in an earnings call following the release of the results, Aramco chief financial officer Khalid al-Dabbagh said that the company's trading arm was “highly profitable” and “growing from period to period”.

Al-Dabbagh said that the company was “ready” for its planned initial public offering (IPO), but said the timing of the long-planned IPO was "a shareholder issue".

"They will announce depending on their perception of what would be the optimum market conditions,” he said.

Nasser added: “We will maintain a prudent and flexible balance sheet. Our financials are strong and we will continue to invest for future growth.”

Alongside its half-year financial results, the oil company also announced its upstream carbon intensity for the first time, which it said was among the lowest globally compared with other oil companies.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications