Rare glimpse into Saudi Aramco shows $111bn net profit

Updated April 02, 2019

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AN aerial view of Saudi Aramco’s Ras Tanura oil refinery and oil terminal.— Reuters
AN aerial view of Saudi Aramco’s Ras Tanura oil refinery and oil terminal.— Reuters

DUBAI: Saudi Aramco’s net profits reached $111 billion last year, according to an assessment published on Monday by Moody’s Investors Services that offered a rare glimpse into the state-owned oil firm’s finances before it issues its first bonds in international markets.

That places Aramco ahead of some of the world’s most profitable firms. By contrast, Apple booked a net profit of about $60bn in its last full year, Royal Dutch Shell had net income of $23bn and Exxon Mobil $21bn.

Moody’s said the oil giant’s revenue hit $355.9bn last year and that it produced 10.3 million barrels per day of crude oil in 2018.

In another assessment issued Monday, Fitch Ratings said Aramco posted profits of $224bn before interest, tax, depreciation and amortization.

Moody’s said Aramco paid $58.2bn in dividends in 2018 and $50.4bn in 2017. It remains unclear exactly how these dividends are distributed within the Saudi monarchy and its ruling family.

Fitch said Aramco accounted for around 70 per cent of the Saudi government’s budget revenue between 2015-2017, but it wasn’t immediately clear if that figure included the dividends mentioned by Moody’s.

In anticipation of a partial listing of Aramco on an international exchange, the Saudi government in 2017 reduced Aramco’s tax rate from 85pc to 50pc. Such moves are part of an effort by Saudi Arabia to create new income streams and lessen the government’s dependence on oil for revenue.

In their first-ever grade assessment for Aramco, Fitch issued the firm an A+ rating, while Moody’s gave it it’s A1 rating.

The ratings are considered investment-grade level and indicate low credit risk, but the agencies held off on issuing their top grades to Aramco due to strong links between the Saudi state and the company. Specifically, Fitch noted “the influence the state has on the company through regulating the level of production, taxation and dividends.” The ratings agencies issued their reports on the same day that Aramco said it will start to meet with investors about selling its bonds which, if issued, would be priced in dollars and traded on the London Stock Exchange. The bonds are expected to help pay for Aramco’s $69bn acquisition of majority shares in Saudi petrochemical firm SABIC from the kingdom’s sovereign wealth fund.

Fitch said its conservative forecasts show Saudi Aramco’s net debt rising to around $35bn by 2021, after incorporating the SABIC transaction.

The $69bn deal with SABIC pumps capital into the Public Investment Fund, which is overseen by Crown Prince Mohammed bin Salman.

Prince Mohammed has transformed the fund to back major development projects throughout the kingdom amid delays to an initial public offering of Aramco, which he’d touted as a way to raise capital for the PIF’s projects.

Published in Dawn, April 2nd, 2019