Page 4 - MEOG Week 12 2022

MEOG COMMENTARY MEOG

Aramco reaps rewards

of oil price gains

Saudi Aramco has announced bumper results for 2021
and plans to increase spending to hike oil production.

SAUDI ARABIA STATE-BACKED Saudi Aramco this week increment projects – a raft of major oilfield
posted its full-year results for 2021, registering developments aimed at maintaining oil produc-
a 124% increase in net income on the back of an tion capacity.
WHAT: almost $30 rise in the average realised price per The ‘Ain Dar and Fazran reservoirs in the
Aramco rode a wave of barrel of Brent compared to the year before. supergiant Ghawar oilfield were tied-in to pro-
buoyant oil prices to On March 20, the company announced that vide an additional 175,000 bpd of combined pro-
report massive increases net income had risen to $110bn, compared duction capacity. Meanwhile, work continues on
in income despite with $49bn in 2020, reflecting “higher crude the Berri, Dammam, Khurais, Marjan and Zuluf
production remaining oil prices, stronger refining and chemicals mar- increments, which will add a further 1.3mn bpd
largely unchanged. gins, and the consolidation of SABIC’s full-year between now and 2026.
results”. Total liquids production – comprising 9.2mn
WHY: The impact of price on the company’s per- bpd of oil, 175,000 bpd of condensate, 200,000
The company spoke of formance is particularly clear given that total bpd of natural gasoline, 291,000 bpd of butane
maintaining its oil market hydrocarbon production fell by 100,000 barrels and 474,000 bpd of propane – sat at 10.36mn bpd
pre-eminence and with a of oil equivalent per day to 12.3mn boepd, with for the year. Crude oil exports comprised 6.3mn
performance like this, few crude oil output remaining flat at 9.2mn bar- bpd.
would bet against it. rels per day, suggesting that the company held Buoyed by the achievement of a single-day
around 2.8mn bpd of spare capacity during the gas output record of 10.8bn cubic feet (306mn
WHAT NEXT: year. cubic metres), natural gas production rose by
Feeling bullish, it has 1.9% to 9.2 bcf (261 mcm) per day with ethane
set a guidance of $40- Performance down 1.7% to 934 mmcf (26 mcm) per day. Pro-
50bn for 2022 capital Free cash flow increased similarly from $49.1bn gress was made on projects at the Haradh and
expenditure as it works to $107.5bn, while Aramco said it had priori- Hawiyah gas fields under the Haradh gas incre-
to expand its oil and gas tised strengthening its balance sheet, reducing ment and these are expected to add additional
production capabilities its gearing ratio by 8.8% to 14.2%. raw gas production capacity by the end of the
as well as investing in the Despite cash flow concerns in 2020 that saw year.
downstream. the company tap international markets for bil- Meanwhile, a gas storage project at the Haw-
lions of dollars – including a $6bn, sharia-com- iyah Unayzah reservoir is nearing the final
pliant Sukuk during Q2 2021 – the company has engineering design phase, with the project seen
continued to live up to its promised $75bn per providing up to 2 bcf (57 mcm) per day of gas
year dividend payment, with its latest $18.75bn for reintroduction to the Master Gas System by
instalment to be paid during this quarter. 2024.
Meanwhile, its board of directors also rec- Capital expenditure rose by 18% to $31.9bn
ommended that $4bn of “retained earnings” as it continued to focus on the increasing its
be capitalised and bonus shares distributed to upstream capabilities, highlighting its efforts
shareholders, in addition to the dividend. in developmental drilling, the start of work on
Aramco did little to quell rumours of a poten- the unconventional Jafurah gas field and the
tial dividend increase, noting that it “aims to construction of the Tanajib Gas Plant. The 2020
maintain a sustainable and progressive dividend, capital programme was reduced by at least $12bn
in line with future prospects, underlying growth in June that year in response to the outbreak of
in free cash flow, and long-term value creation coronavirus (COVID-19) and the Brent price
through investments in available opportunities.” going into freefall.
A day later it held a webcast, adding more col- One of the key highlights of the year was what
our to the figures and noting that dividends and Aramco described as “progress in its portfolio
shareholder value were likely to increase with- optimisation programme” – an effort to emu-
out providing detail on what would trigger such late (and perhaps surpass) the success regional
a move. rival Abu Dhabi National Oil Co. (ADNOC)
Achievements in the upstream were high- has enjoyed by allowing international investors
lighted by progress on the so-called crude to lease stakes in key infrastructure assets while

P4 www. NEWSBASE .com Week 12 23•March•2022