Saudi Aramco’s first-half net income falls 12%

Saudi Aramco, the world’s top oil producer, reported first-half net income of $46.9bn on Monday, down from $53.02bn a year earlier.

By comparison, Apple Inc, the world’s most profitable listed company, made $31.5bn in the first six months of its financial year.

Aramco said it generated total revenues, including other income related to sales, of $163.88bn in the first half of this year, down from $167.68bn a year earlier.

Aramco, the world’s biggest oil producer, is also taking a 20 per cent stake in the oil to chemicals business of India’s Reliance Industries Ltd, Reliance chairman Mukesh Ambani said on Monday, in one of the biggest ever foreign investments in India.

State-run Aramco disclosed its closely guarded financials for the first time ever earlier this year, revealing its 2018 earnings in order to obtain a public rating and start issuing international bonds.

The figures showed that Aramco was the most profitable company in the world, surpassing U.S. behemoths such as Apple and Exxon Mobil.

The Saudi national oil company plans to launch an initial public stock offering or IPO by 2020-2021, having postponed its flotation from 2018.

Compared to Aramco’s first half earnings, U.S. oil giant Exxon Mobil Corp. made around $5.5bn in the first half of the year, while Royal Dutch Shell reported $8.8bn.

“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, cost management an fiscal discipline,” Aramco’s president and chief executive officer Amin Nasser said in a statement.

Aramco said the drop in earnings was mainly due to a drop of 4 per cent in the average realised price of crude oil from $69 to $66 per barrel and an increase in purchases, producing and manufacturing costs, and depreciation and amortization costs.

The drop was partially offset by a decrease of $2.62bn in income taxes, the oil company said.

Aramco said it had a crude output of 10 million barrels a day in the first six months of the year, little changed from the same period in 2018.

Saudi Arabia has been restricting its output under an OPEC-led pact to reduce global oil supply to support prices.

Saudi Arabia pumped below 10 million barrels per day for most of 2019.

Despite a drop in income, Aramco paid a dividend of $46.4bn to the government including a special dividend of $20bn, up from $32bn a year earlier.

This shows Saudi Arabia’s strong dependence on the oil producer to finance the kingdom’s budget needs.

Aramco has been boosting investment in refining and petrochemicals, with the aim of almost tripling its chemicals production to 34 million tonnes per year by 2030 and raising its global refining capacity to 8-10 million barrels per day (bpd) from more than 5 million bpd.

The company has also been involved in most of the kingdom’s high-profile deals in the last two years announcing at least $50bn worth of investments in Saudi Arabia, Asia and the United States.

The Aramco IPO is a centrepiece of Saudi Arabia’s economic transformation drive to attract foreign investment and diversify away from oil.

Work on the IPO was halted in 2018 when Aramco shifted its attention to the acquisition of a 70 per cent stake in petrochemicals maker Saudi Basic Industries Corp.