The Saudi Oil Firm Aramco Reports Record 2022 Profits Of $161 Billion

• State-controlled Saudi Aramco, the world's largest oil company, reported a record net income of $161.1 billion in 2022, up 46.5 percent from the previous year.
• Amin Nasser, the CEO of Aramco, stated on a Sunday earnings call that this was likely the greatest net income ever recorded in the business world.

The largest annual profit ever recorded by an oil and gas business was revealed by Saudi Arabia's state-controlled oil behemoth Aramco on Sunday. 2022's record net income of $161.1 billion was the corporation's highest-ever total ever.

Aramco reported that net income rose from $110 billion in 2021 by 46.5 percent over the course of the year. In addition, free cash flow increased to a record $148.5 billion in 2022 from $107.5 billion in 2021.

Amin Nasser, the CEO of Aramco, stated on a Sunday earnings call that this was likely the greatest net income ever recorded in the business world.

The results, which were helped by rising oil and gas prices through the year, as well as larger sales volumes and better margins for refined goods, are almost treble the profit that oil company ExxonMobil reported for 2022.

Around the beginning of 2022, oil and gas prices rose as a result of western sanctions on Russia over its invasion of Ukraine, which gradually restricted access to Moscow's supplies, notably seaborne petroleum and oil products.

Since then, the price of oil has decreased by more than 25% year over year, with sizzling inflation and rising interest rates obscuring a more optimistic demand picture from China. Prices for Brent and WTI dropped 6% just last week. The last time Brent traded, it was around $80 per barrel.

“We are cautiously optimistic,” Nasser said. “If you consider China opening up, the pickup in jet fuels and the very limited spare capacity, we are cautiously optimistic in the short to mid-term [that] markets will remain tightly balanced.”

To be paid in the first quarter of 2023, Aramco increased its dividend for the fourth quarter by 4% to $19.5 billion. Moreover, Aramco said that it would grant bonus shares to qualified shareholders as a result.

“We’re aiming to sustain [the dividend] at this level,” Aramco Chief Financial Officer Ziad Al-Murshed told the earnings call. “We have the financial strength to go through the ups and downs of the cycle.”

Underinvestment Risk

In addition, Nasser reiterated his warning about "chronic underinvestment" in the hydrocarbons industry during the results announcement.

“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real, including contributing to higher energy prices,” Nasser said on Sunday, echoing comments made during a recent interview with CNBC.

Saudi Arabia has advocated for avoiding short-term fuel shortages through the dual funding of fossil fuel supplies and the green transition, both at the cabinet and Aramco levels.

We don’t see enough investment getting into the markets right now,” he reiterated on the Sunday call. “We encourage the industry, policymakers, investors… to avail additional investment to really increase the amount in the sector, so that we can meet future demand.

According to Aramco, daily average hydrocarbon production in 2017 was 11.5 million barrels of total liquids and 13.6 million barrels of oil equivalent. The International Energy Agency reported that Saudi Arabia produced 10.39 million barrels of crude oil per day in January, according to the Oil Market Report for February.

Saudi Arabia has been setting an example for the group's efforts to jointly decrease their output targets by 2 million barrels per day, as agreed in October and reiterated at technical and ministerial meetings subsequently. Saudi Arabia serves as chair of the key OPEC+ producers' alliance. The group's decision to restrict supply options has alienated some overseas consumers and led to a verbal spat with Washington at the close of the previous year as President Joe Biden's administration emphasized the need to reduce family burdens.

On Friday, longtime enemies Saudi Arabia and Iran reached a diplomatic agreement through the mediation of China. An extensive assault on Aramco's infrastructure in 2019 that sharply increased prices and jeopardized the security of the world's supplies has already been attributed to Iran. Tehran has refuted any participation.

“The deal will hopefully result in less geopolitical tension and enhance regional stability, which will definitely have a positive impact on the global market,” Nasser said in response to a question about the Saudi-Iran development.

Growth Horizon

By 2027, the corporation hopes to boost its maximum production capacity to 13 million barrels per day by making additional investments.

The amount spent on capital projects increased by 18% to $37.6 billion last year, and it is anticipated that it will rise "till about the middle of the decade" to $45 billion to $55 billion.

“Our focus is not only on expanding oil, gas and chemicals production, but also investing in new lower-carbon technologies with potential to achieve additional emission reductions in our own operations and for end users of our products,” Nasser said.