Saudi Arabia’s national oil company reported record annual profit of $161 billion for 2022, the largest ever by an energy firm, continuing a dramatic turnaround for the industry after the Ukraine war lifted crude prices and upended commodity flows.
Saudi Arabian Oil Co., known as Aramco, said its yearly profit swelled by 46% in 2022, a period when Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, rebuffed U.S. requests to pump more oil to help tame surging crude prices.
Aramco is the latest oil major to post a record annual profit last year, continuing a dramatic turnaround after many companies were battered by an historic decline in energy demand during the pandemic, leading some of them to idle rigs and slash production. Aramco and
Exxon Mobil Corp.
were notable outliers, arguing more forcefully than most that the industry needs to keep investing in fossil-fuel production.
Aramco Chief Executive Amin Nasser said that the company spent $37.6 billion in 2022 to expand its production capacity and that it would significantly increase that amount in coming years.
“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real—including contributing to higher energy prices,” Mr. Nasser said.
The results cement the kingdom’s dominance as the world’s most important oil producer and reinforce its geopolitical power at a time of shifting alliances in the Middle East. On Friday, Saudi Arabia and Iran announced a China-mediated deal to renew diplomatic relations, representing an increase in Beijing’s influence in the region. The oil boom has in part fueled the Saudis’ willingness to pursue foreign policies and economic interests at odds with the U.S.
The company, majority-owned by the Saudi government, unexpectedly raised its dividend by 4% to $19.5 billion for the fourth quarter of last year, to be paid in the first quarter of 2023. The company’s board also recommended the distribution of bonus shares to eligible shareholders in the amount of one share for every 10 shares held.
Aramco’s dividend commitment has been a key source of funding for the Saudi government and a bellwether for energy investors—a large, recurring payout the company promised to make in a bid to lure investors to its long-delayed IPO in 2019.
Mr. Nasser said capital expenditures jumped 18% in 2022, as the company plans to increase its maximum sustainable capacity to 13 million barrels a day by 2027 from 12 million a day now. Aramco is aiming to spend $45 billion to $55 billion this year, significantly more than a total of $37.5 billion in capital expenditure from U.S. oil majors Exxon Mobil and
Chevron Corp.
Aramco’s results cemented Saudi Arabia’s dominance as the world’s most important oil producer.
Photo:
MAXIM SHEMETOV/REUTERS
As global economies rebounded over the past year and Russia’s invasion of Ukraine scrambled energy markets, prices soared.
Last year, international benchmark Brent briefly reached $139 a barrel. Oil-and-gas companies were flooded with cash and drove tens of billions of dollars into share repurchases and dividends.
With the West largely avoiding Russian oil and gas in the wake of sanctions imposed on Moscow over its invasion of Ukraine, Middle East petrostates now have a new market in Europe after years of focusing on sales to Asia. Aramco sees Europe as a market of the future because of shifting geopolitics and its move to replace all Russian energy imports by as early as mid-2024.
Saudi Arabia was the fastest-growing of any major oil supplier to the European Union in the third quarter last year, with a 9.1% market share of imports of the commodity, compared with 5.1% on average last year, according to Eurostat.
In recent months, Saudi Energy Minister Abdulaziz bin Salman has signaled that the kingdom is aiming to supply more crude to Europe.
“We are engaged with so many governments,” Prince Abdulaziz said at an industry event in October. “Just to give you an example, Germany, Poland, the Czech Republic, Croatia, Romania and others.”
High oil prices boosted Aramco’s free cash flow to $148.5 billion last year, compared with $107.5 billion in 2021. Its gearing ratio, a measure of debt to equity, decreased 7.9% last year, compared with 12% at the end of 2021.
Aramco is one of the most valuable companies globally, with a market cap of $1.9 trillion, briefly taking the top spot from Apple Inc. in May. Its performance has helped boost Saudi economic growth even as the U.S. and Europe worry about recession.
Saudi Arabia, the region’s biggest economy, recorded the fastest GDP growth in the world last year among major economies, according to the International Monetary Fund, and 2023 is expected to be another profitable year for the world’s biggest oil exporter.
In Saudi Arabia,
Prince Mohammed
has directed oil policy through OPEC to keep crude prices high for as long as possible, while his government tries to carry out policies that will protect the kingdom from boom and bust cycles. Prince Mohammed runs the kingdom’s day-to-day affairs for his elderly father,
King Salman.
The crown prince is doubling down on an ambitious program, known as Vision 2030, to diversify the economy away from oil, aiming, for instance, to turn his once-cloistered kingdom into a global entertainment and tourism destination. Still, oil remains the engine of the economy.
The Gulf has had oil booms before, when crude prices rose above $100 per barrel and monarchs invested billions of dollars in white-elephant projects that were never completed and handed out cash to citizens to buy support. When prices crashed in the past, Saudi Arabia introduced austerity measures.
This boom is different, officials and economists say, as it comes as some Gulf countries move to liberalize their economies.
The kingdom and other Gulf states have also used their windfall oil income to help crisis-racked neighbors such as Egypt, Pakistan and Turkey, doubling down on a diplomatic tool they have long used to build their geopolitical power.
Write to Summer Said at summer.said@wsj.com
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