The word’s most valuable company, the $2.48 trillion Saudi state oil company Saudi Aramco, is a little over 4% more valuable today. Even the normally stable giant of the oil and gas industry has seen its valuation grow significantly this year on the higher energy commodity prices that have resulted from Russia’s invasion of Ukraine and its share price is up 31% in 2022.
Today’s 4% leap in Aramco’s market capitalisation came as the company announced an 82% increase in its quarterly net income to $39.5 billion. The figure is both ahead of analysts’ expectations for $38.5 billion and a new record for Aramco since becoming a public company in December 2019. Last year the state oil producer banked $21.7 billion over the same three months.
Since floating a tiny 1.5% of its equity in late 2019, the Saudi Aramco share price has shown stability at odds with the usual trend for oil and gas producers. It’s a cyclical industry with profits rising and falling with oil prices and valuations reflecting those cycles. But Aramco’s scale and the fact only a very small percentage of its total equity is listed has allowed it to even out those cycles for investors by paying a consistent dividend that changes very little.
However, the jump in energy commodity prices this year has been significant enough to influence the Saudi Aramco share price as well and the company last week surpassed Apple to again become the world’s most valuable. The company said its bumper quarterly earnings were down to a combination of “higher crude oil prices and volumes sold, and improved downstream margins”.
The company produced an average 13 million barrels of oil a day over the quarter compared to 12.3 million over the same period a year earlier. Opec, the cartel of leading oil producers Saudi Arabia is the de facto leader of, is under pressure from Western nations to relieve price pressure by increasing production but has so far resisted opening the taps significantly.
Oil prices have dropped back to around $110 a barrel recently after highs of as much as $140 after the onset of the war in Ukraine. However, they could well rise again later this year if sanctions against Russia, like a EU ban on Russian oil, are tightened. High oil prices are contributing significantly to run-away inflation levels expected to reach double figures over the next couple of months.
Aramco’s net profit for 2021 was $110 billion compared to $49 billion in 2020 when demand was supressed by the Covid-19 pandemic. It will maintain its $18.8 billion cash dividend in the second quarter, the majority of which goes to the Saudi state which owns 94% of the company.
