Saudi Aramco reported a 12% fall in half-year net profit on Monday, yet remained the world’s most profitable company, while India’s Reliance Industries (RELI.NS) said Aramco is looking to buy into its refining and petrochemicals business.
Aramco signed a letter of intent to take a 20% stake in Reliance’s oil-to-chemicals business in one of the largest ever foreign investments in India, Reliance announced.
Aramco, which declined to comment on the Indian deal, reported a net profit to $46.9 billion.
By comparison, Apple Inc (AAPL.O), the world’s most profitable listed company, made $31.5 billion, U.S. rival Exxon Mobil Corp. around $5.5 billion and Royal Dutch Shell (RDSa.L) some $8.8 billion.
“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,” CEO Amin Nasser said in a statement.
The company generated total half-year revenue, including other income related to sales, of $163.88 billion, down from $167.68 billion a year earlier. Free cash flow rose 6.7% to $38 billion.
Aramco said the drop in earnings was mainly due to a 4% fall in the average realized price of crude oil to $66 from $69 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 $2.62 billion in income taxes, the company said.
Aramco is expanding in refining at home as well as in new markets, particularly in Asia.
It plans to raise its refining capacity – inside Saudi Arabia and abroad – to 8-10 million barrels per day, from around 5 million bpd now.
Its trading arm Aramco Trading Co (ATC) has also been expanding overseas to better compete with global trading houses.
“Our financials are strong and we will continue to invest for future growth,” CEO Nasser said.
Aramco also paid a dividend of $46.4 billion to the government including a special dividend of $20 billion, up from $32 billion a year earlier.
(Graphic: Aramco vs Majors profits – tmsnrt.rs/2MXVW3h)
State-run Aramco reported its 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.
It aims to launch an initial public offering (IPO) by 2020-2021, having postponed its flotation from 2018.
Aramco’s planned IPO is the centerpiece 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% stake in petrochemicals maker Saudi Basic Industries Corp (2010.SE).
The company said it had a crude output of 10 million barrels a day in the first six months of the year, little changed from a year earlier.
Saudi Arabia has curbed output under an OPEC-led pact to reduce global oil supply in order to support prices.
Saudi Arabia has pumped fewer than 10 million barrels per day for most of 2019.