Aramco: Strong Earnings Drive Higher Capex

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Amin Nasser
Jon Gambrell/AP

Saudi Aramco plans to boost capital spending to its highest level ever in 2023 after reporting record annual net income of $161 billion for 2022 on the back of high oil prices and production levels.

Aramco issued capital spending guidance of $45 billion-$55 billion for 2023 and said its spending would continue to increase until around the middle of the decade.

Aramco CEO Amin Nasser told reporters on an earnings call that several investments made outside the kingdom last year — including liquids-to-chemical projects — were still being finalized and would lead to increased spending in 2023.

"We hope [these investments] will be accelerated in 2023 and that's why we increased capital guidance in anticipation," said Nasser.

Capital spending amounted to $37.6 billion last year, up 18% versus 2021, according to the company’s financial results announced Sunday.

Aramco had initially provided capex guidance for 2022 of $40 billion-$50 billion, but ultimately spent slightly below the bottom end of that range.

Delivery on Track

Nasser said Aramco remains on track to deliver its planned oil production capacity increase to 13 million barrels per day by 2027 along with a 50% hike in gas output by 2030.

Contractors in the oil-rich Eastern Province previously told Energy Intelligence that the pace of contract awards by Aramco had picked up significantly in 2022.

Construction and engineering activity for the offshore Marjan and Berri crude oil increments continues to progress and is expected to add production capacity of 300,000 b/d and 250,000 b/d respectively by 2025, Aramco said.

Another crude oil increment at Zuluf is in the engineering phase and a planned onshore central processing facility is expected to process 600,000 b/d of crude from the offshore field by 2026.

Construction activity is also continuing at the Dammam development project, which is expected to add 25,000 b/d and 50,000 b/d of crude capacity by 2024 and 2027 respectively.

Other investment opportunities targeted by Aramco include blue hydrogen and carbon capture and storage (CCS) projects as well as expanding LNG trading, Nasser said, adding that the geographic focus will be on China and India.

Record Earnings

Aramco announced full-year 2022 revenues of $535 billion, up 49% versus 2021, as well as a year-on-year jump of 46% in net profit to $161 billion. Free cash flow soared to $149 billion in 2022 from $107.5 billion in 2021.

"This is probably the highest net income ever recorded in the corporate world," Nasser said on the call with reporters.

Higher oil prices, increased export volumes and better refining margins all contributed to Aramco's bumper results for 2022, he said.

Aramco increased its quarterly dividend payout by 4% to $19.5 billion and awarded one bonus share for every 10 shares held. It did not approve any special dividends

Chief Financial Officer Ziad al-Mursheed told reporters that the company was looking to maintain and progressively grow dividends.

Market Conditions

Nasser said he remained "cautiously optimistic" for 2023 amid hopes that oil demand will strengthen as China continues to open up after its Covid lockdowns.

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

Asked whether Aramco was concerned about discounted Russian crude flowing to Asian markets amid Western sanctions against Moscow, Nasser dismissed the impact on the company's market share given its long-term relationships with Asian buyers and its reputation as a reliable supplier.

There is a "healthy call on our oil production from these markets despite the Russian crude increasing," he said.

Nasser said recent Saudi imports of petroleum products from Russia had been used in the kingdom's domestic market.

Shipping data has shown that Saudi Arabia has been importing more Russian diesel, with some media reports suggesting this might be a way for Moscow to bypass sanctions and "re-export" its products.

"Part of Aramco Trading operations is to import petroleum refined products from multiple sources satisfying domestic demand within the kingdom of Saudi Arabia. The company continues to try and balance its needs which has been the practice prior to the Russian-Ukraine conflict," Nasser said.

Last week's landmark agreement between Saudi Arabia and Iran is expected to reduce geopolitical tensions in the Mideast region and improve security, he said, when asked about the deal that China brokered.

Earnings, Company/Financials
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