Saudi Arabia hikes oil investments as it profits from price surge

By Saeed Azhar and Maha El Dahan

DUBAI (Reuters) – Saudi Arabia’s state oil firm Aramco, underneath strain from the West to spice up output amid hovering costs, pledged on Sunday to hike investments by round 50% this yr because it reported a doubling in 2021 earnings.

Oil costs leapt 50% final yr as demand recovered from the COVID-19 pandemic, after which surged above $100 a barrel to 14 yr highs in February after Russia invaded Ukraine, main Western nations to induce main producers to extend output.

Aramco stated it could increase its capital expenditure (capex) to $40-50 billion this yr, with additional progress anticipated till across the center of the last decade. Capex was $31.9 billion final yr, up 18% from 2020 – indicating a rise of about 50% for this yr on the center of the steering vary.

Requested if Aramco would pump extra oil to fill any gaps available in the market left by the struggle in Ukraine, CEO Amin Nasser stated it could produce in line with pointers from the Saudi vitality ministry.

The corporate has stated it plans to boost its crude oil “most sustainable capability” to 13 million barrels a day by 2027, and needs to extend gasoline manufacturing by greater than 50% by 2030. Its common hydrocarbon manufacturing was 12.3 million barrels of oil equal per day final yr.

Aramco made $110 billion in internet revenue in 2021, up from $49 billion a yr earlier and in contrast with analysts’ imply estimate of $106 billion, in line with Refinitiv Eikon.

With an increase in each output and costs, analysts anticipate internet revenue to achieve $140 billion in 2022.

Aramco’s shares rose over 4% in early commerce to a excessive of 43.85 riyals, valuing it at 8.76 trillion riyals ($2.34 trillion).

A $2 trillion valuation was a purpose sought by de-facto Saudi chief Crown Prince Mohammed bin Salman earlier than the corporate’s report $29.4 billion preliminary public providing in 2019.

He has introduced plans to promote extra Aramco shares.

The surge in Aramco’s valuation on Sunday moved it above that of Microsoft, although it stays behind Apple’s $2.68 trillion.

The Saudi authorities stated final month that Crown Prince Mohammed, who’s main an enormous funding drive to diversify the dominion’s financial system, had transferred 4% of Aramco shares to the nation’s sovereign wealth fund.


“They’re ramping up the reinvestment fairly considerably and they’re probably to make use of (the free money movement) to de-lever the steadiness sheet,” stated Yousef Husseini, head of the supplies staff at EFG Hermes Analysis.

Aramco stated its free money movement was $107.5 billion final yr, in contrast with $49.1 billion in 2020. It declared a dividend of $75 billion for 2021, according to its earlier pledge.

The corporate stated it additionally deliberate to develop a big hydrogen export functionality and develop into a world chief in carbon seize and storage expertise.

Nasser advised an earnings name that international oil demand was rising healthily and spare manufacturing capability was declining.

In a separate assertion he stated “though financial circumstances have improved significantly, the outlook stays unsure as a consequence of numerous macro-economic and geopolitical components.”

($1 = 3.7515 riyals)

(Reporting by Saeed Azhar, Hadeel Al Sayegh and Maha El Dahan; Enhancing by Shri Navaratnam and Mark Potter)

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