Shell earned 11.5 billion dollars (11.2 billion euros) in the second quarter. At ExxonMobil, nearly $18 billion remained from April through June. Child’s play, Saudi Aramco showed last Sunday. Saudi oil company made a profit in 91 days of no less than 48.4 billion dollars.
Compared to last year’s net result, this almost doubles. The reasons for earnings growth are the same all over the world: higher oil and gas prices, increased production and growing profits from the processing (refining) of the crude oil are driving record returns.
The big difference is that Aramco does not immediately let its shareholders profit extra from the golden times. Dividends remain the same for the third consecutive quarter at $18.8 billion. The dividends of American and European companies also did not increase (much), but many billions of dollars in own shares were bought back. Attractive to the investor, because this way the profit per share increases ‘automatically’.
That buyback is not obvious at Aramco, because most shares (more than 90 percent) are owned by the state. Although the company went public in December 2019, only 1.5 percent of the shares were offered. Yet that small tuft yielded almost $26 billion, bringing the value of the entire group to $1,900 billion. The stock price has since gone up. On Sunday, the stock closed at 40.45 riyals, which is equivalent to nearly $11. At the IPO in 2019, the shares still cost 32 riyals.
Also read: Oil companies are heavily criticized with billions in profits
Permanently high price
Aramco’s earnings are critical to the country’s financial well-being. High oil producer profit margins are directly visible in the growth rates of the national economy. For this year, the International Monetary Fund expects the economy to grow by 7.6 percent, which is unmatched by any country. Many countries are struggling with stagnating growth and inflation precisely as a result of high energy prices. Over the first six months of this year, Aramco posted a profit of nearly $90 billion.
With the exception of one day, the oil price has not fallen below $100 a barrel in the second quarter. The price level is now lower, for example a barrel of (European) Brent was worth more than $93 on Monday, and that has everything to do with more gloomy economic forecasts. Yet few analysts expect oil to become much cheaper soon, mainly due to the relatively low supply. And the impending shortage of energy as a result of the Russian invasion of Ukraine is also adding to the tension.
“The world is crying out for reliable energy,” said Aramco CEO Amin Nasser on Sunday, “and we are answering that call.” Climate problem or not, Nasser assumes more demand for fossil fuels “for the rest of this decade”.
To meet that rising demand, Aramco increased its investments by 8 percent in the first six months of the year to $17 billion. In 2022, the company, which accounts for almost 10 percent of world production, expects to reach at least $ 40 billion in investments.
A lot of money, but the increase in production capacity is gradual. Only in five years does Aramco expect to reach a maximum production of 13 million barrels per day, 1 million more than the current maximum. To keep the price high, Saudi Arabia currently produces about 10.5 million barrels of oil per day.
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