Saudi Aramco posted a 12% decline in profit as the world’s biggest oil exporter reported first-half results for the first time, ahead of a potentially record-breaking share sale.
Net income was $46.9 billion, down from $52.9 billion a year earlier, state-owned Aramco said Monday. The results, reflecting a decline in crude prices and an increase in costs, are being closely watched as the company prepares for an initial public offering in 2020 or 2021.
“Despite lower oil prices during the first half of 2019, we continued to deliver solid earnings and strong free cash flow underpinned by our consistent operational performance,” Chief Executive Officer Amin Nasser said in a statement.
The average selling price for Aramco’s crude fell to $66 a barrel in the period from $69 a year earlier. Total hydrocarbon production held steady at 13.2 million barrels of oil equivalent a day, of which 10 million barrels was crude. The company is expanding its Marjan and Berri offshore fields to add capacity.
Aramco will hold its first-ever earnings call with investors later Monday as it tiptoes toward the greater disclosure required of public companies. It published annual financial statements for the first time in April, ahead of a $12 billion bond sale. An IPO would put the Saudi giant under even greater scrutiny from investors and invite comparisons with other oil majors.
Aramco, officially known as Saudi Arabian Oil Co., paid dividends of $46.4 billion to shareholders in the first half, up from $32 billion a year earlier. That included an additional $20 billion to the Saudi government as a special payout.
Although it’s the world’s most profitable company, high taxes mean Aramco can generate less cash from each barrel than other top oil producers. Saudi Arabia depends on the company to finance social and military spending, as well as the lavish lifestyles of hundreds of princes.
Income taxes were $45.6 billion in first half, compared with $48.2 billion a year earlier. Total production royalties and excise and other taxes were $25.1 billion, little changed from $25.6 billion a year earlier.
Saudi Arabia announced plans for an IPO of Aramco three years ago, but the IPO was delayed to allow the company to acquire chemicals giant Saudi Basic Industries Corp. Damman-based Aramco sold bonds to buy a 70% stake in Sabic from the kingdom’s sovereign wealth fund.
Aramco is keen to bolster its downstream business, including through acquisitions at home and abroad. On Monday, it continued its push into Asian oil refining with an agreement to buy a 20% stake in Reliance Industries Ltd.’s oil-to-chemicals division at an enterprise value of $75 billion.
By Matthew Martin