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Saudi Aramco Triples Net Profits For Q2 Due To Higher Prices And Demand Rebound

Saudi Aramco Triples Net Profits For Q2 Due To Higher Prices And Demand Rebound
An increase in global oil prices and global oil demand helped Saudi Arabian state oil producer Aramco to report four times growth in net profits for its second quarter comfortably beating estimate of analysts.
Its estimate beating results were driven by easing of Covid-19 restrictions globally as well as roll out of Covid-19 vaccines, stimulus measures and economic growth in the crucial markets of the world.
In recent weeks, other oil giants have also reported similar strong quarterly results.
The second quarter net income for Exxon Mobil, as declared by the company last month, came in at $4.69 billion, or $1.10 per share, compared with a loss of $1.08 billion, or 26 cents per share in the same period in the previous year.
Similarly, its highest quarterly profit in more than 20 years was reported for its latest completed quarter as it reported adjusted earnings at $5.53 billion, whereas its earnings was at $638 million for the same period a year ago.
There has been a gain of 35 per cent in global oil prices so far this year also partly because of output cuts made by the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+. The price on Friday was at $70.70 a barrel.
"Our second quarter results reflect a strong rebound in worldwide energy demand and we are heading into the second half of 2021 more resilient and more flexible, as the global recovery gains momentum," Aramco CEO Amin Nasser said in a statement.
For the quarter ended June 30, Aramco reported net profit of 95.47 billion riyals ($25.46 billion) compared to 24.62 billion riyals for the same period a year ago. A net profit of $23.2 billion was expected on an average by analysts.
By the end of the year, global oil demand us expected to be 99 million barrels a day and about 100 million barrels next year, said Aramco's CEO at an earnings call.
Nasser reiterated the company’s previously announced plan of attempting to enhance its own capacity to 13 million barrels day.
For the second quarter, a dividend of $18.8 billion was declared by Aramco which was congruent to the target that the company had set for itself. The dividend will be paid in the third quarter.   
Aramco was expected to declare a special dividend because of higher oil prices which was instrumental in the boosting of the company’s free cash flow, according to analysts at Credit Suisse.
The extra cash is likely to be retained by Aramco for possibly participating in the new state-backed Shareek (Partner) initiative, which would see the company partnering with private sector investments, said Yousef Husseini, equity research analyst at EFG Hermes.
"I think the reason they maintained [the dividend] and our rationale was that they are retaining money to invest in future projects and particularly the "Shareek" programme," he said.
During the second quarter, Aramco’s capital expenditure was $7.5 billion which was 20 per cent higher than in the same period a year ago.

Christopher J. Mitchell

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