Saudi Aramco more than doubles 2021 annual profit to $110bn on higher oil prices

The company raised capital expenditure guidance to between $40bn and $50bn in 2022

Aramco ranks only third behind Apple and Microsoft in terms of market value. AFP

Saudi Aramco, the world's largest oil-exporting company, said annual net profit more than doubled in 2021, driven by higher oil prices.

Net profit rose to $110 billion for the 12 months to the end of December, up from $49bn in 2020, helped by the consolidation of Sabic's full-year results and stronger refining and chemicals margins, the company said on Sunday in a regulatory filing to the Tadawul stock exchange.

Earnings beat the average estimate of $106bn of analysts polled by Refinitiv.

"Our strong results are a testament to our financial discipline, flexibility through evolving market conditions and steadfast focus on our long-term growth strategy," Amin Nasser, Aramco's president and chief executive, said in a statement.

"Although economic conditions have improved considerably, the outlook remains uncertain due to various macroeconomic and geopolitical factors. But our investment plan aims to tap into rising long-term demand for reliable, affordable and ever more secure and sustainable energy."

Saudi Aramco increased capital expenditure guidance to between $40bn and $50bn in 2022, with further growth in spending expected until about the middle of the decade. Capital expenditure reached $31.9bn, an increase of 18 per cent from 2020.

"This is in line with the company’s belief that substantial new investment is required to meet demand growth, against a broader decline in upstream investment across the industry globally," Aramco said.

In a boost to the state-owned energy major, crude oil prices rose about 67 per cent in 2021 as easing pandemic-related restrictions and improving global economic growth resulted in petroleum demand overtaking supply.

Brent, the global benchmark for two thirds of the world's oil, soared to a notch under $140 per barrel this month amid Russia’s military offensive in Ukraine. It has since given up some gains amid talks between Russia and Ukraine and concerns of demand growth in China owing to rising Covid-19 cases.

Brent ended trading on Friday up 1.21 per at $107.9 and West Texas Intermediate, the gauge that tracks US crude, was also 1.67 per cent higher at $104.7.

Aramco's shares rose 3.6 per cent to 43.35 Saudi riyals ($11.56) on Sunday, near a record high.

Aramco ranks only third behind Apple and Microsoft in terms of market value.

Aramco kept its 2021 dividend unchanged at $75bn and said it would issue one bonus share for every 10 shares held.

The company’s board recommended $4bn in retained earnings to be capitalised and bonus shares be distributed to shareholders, subject to required Extraordinary General Assembly and regulatory approvals.

Aramco's free cash flow rose to $107.5bn in 2021, compared to $49.1bn in 2020. Its gearing ratio, a measure of debt to equity, decreased to 14.2 per cent, compared to 23 per cent at the end of 2020. It is now below the company’s self-imposed cap of 15 per cent for the first time since mid-2020.

The company will raise crude oil "maximum sustainable capacity" 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. For its downstream business, it plans to expand liquids-to-chemicals capacity to up to 4 million bpd.

Aramco also intends to develop a significant hydrogen export capability and become a global leader in carbon capture and storage (CCS), it said.

“We recognise that energy security is paramount for billions of people around the world, which is why we continue to make progress on increasing our crude oil production capacity, executing our gas expansion programme and increasing our liquids-to-chemicals capacity," Mr Nasser said.

“We are also investing in CCS, renewables and low-carbon hydrogen production — supporting the global energy transition and advancing our net-zero ambition.”

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

Following the Cop26 climate summit in Glasgow last year, several countries have pledged to aim for net zero emissions by 2050, while global airlines, banks and other companies are also focusing on the mid-century goal.