Rare glimpses of Saudi Aramco, Saudi Arabia's oil giant, show net profit of $ 111 billion



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Saudi Arabia's net income hit $ 111 billion last year, according to an assessment published by Moody's Investors Services on Monday, which offered a rare glimpse of the state oil's finances before issuing its first bonuses in international markets.

This puts Aramco ahead of some of the most profitable companies in the world. In contrast, Apple reported a net profit of about $ 60 billion in its last year, Royal Dutch Shell netted $ 23 billion and Exxon Mobil $ 21 billion.

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

Khaled al-Otaiby, an employee of Saudi oil company Aramco, watches the progress on a platform at the al-Howta oil field near Howta in Saudi Arabia.

John Moore

Khaled al-Otaiby, an employee of Saudi oil company Aramco, watches the progress on a platform at the al-Howta oil field near Howta in Saudi Arabia.

The numbers provide the first glance at Aramco's recent earnings and profits. The company, which began as a US venture with a concession of oil rights in Saudi Arabia, was fully acquired by the Saudi government in 1980.

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"I would say this tells us that Aramco is worth at least a trillion dollars," said Ellen Wald, president of Transversal Consulting and author Saudi Inc, a book on Aramco's corporate history.

Amin Nasser, President and CEO of Aramco.

HAMAD I MOHAMMED

Amin Nasser, President and CEO of Aramco.

In another valuation released on Monday, Fitch Ratings reported that Aramco reported earnings of $ 224 billion before interest, taxes, depreciation and amortization.

Moody's said Aramco paid $ 58.2 billion in dividends in 2018 and $ 50.4 billion in 2017. It is not yet clear how these dividends are distributed within the Saudi monarchy and its family ruler.

Fitch said that Aramco accounted for about 70 percent of the Saudi government's budget revenue between 2015-2017, but it was not immediately clear whether that number includes the dividends mentioned by Moody's.

Saudi Aramco's net income reached $ 111 billion last year

Hamad I Mohammed

Saudi Aramco's net income reached $ 111 billion last year

Anticipating a partial listing of Aramco on an international exchange, the Saudi government in 2017 reduced Aramco's rate from 85% to 50%. These measures are part of Saudi Arabia's effort to create new revenue streams and reduce government dependence on oil for revenue.

In its first grade assessment for Aramco, Fitch issued the company an A + rating, while Moody's gave the company the A1 rating.

The ratings are considered investment grade level and indicate low credit risk, but the agencies have suspended issuing their highest ratings to Aramco because of strong links between the Saudi state and the company. Specifically, Fitch noted "the influence the state has on the company by regulating the level of production, taxation and dividends."

Abqaiq oil factory from Saudi Arabia in eastern Saudi Arabia.

FLYER

Abqaiq oil factory from Saudi Arabia in eastern Saudi Arabia.

Wald said that five years ago under the late King Abdullah, government ties with Aramco would not have been a significant concern because the company had "essentially complete independence."

This has now changed under King Salman and his son, Crown Prince Mohammed bin Salman, who have taken a much more active role in controlling various power centers in the kingdom, including Aramco, Wald said.

"There's no way to say … what kind of demands this king and his son can make on the company in the future that may impact their primary profitability," she added.

Crown Prince of Saudi Arabia, Mohammed bin Salman.

AP

Crown Prince of Saudi Arabia, Mohammed bin Salman.

The rating agencies issued their reports on the same day that Aramco said it will begin meeting with investors on the sale of its securities that, if issued, would be priced in dollars and traded on the London Stock Exchange. The bonuses are expected to help pay for Aramco's majority share acquisition for $ 69 billion from SABIC, the Saudi petrochemical company, from the kingdom's sovereign wealth fund.

Fitch said its conservative forecasts show Saudi Aramco's net debt will rise to about $ 35 billion by 2021 after incorporating the SABIC transaction.

The $ 69 billion deal with SABIC pumped capital into the Public Investment Fund, which is overseen by the Crown Prince.

Prince Mohammed transformed the fund to support large development projects across the kingdom amid delays in an Aramco initial public offering that he had identified as a way to raise capital for PIF projects.

The deal was closed after the Crown Prince's initial efforts to lure Western investors into his plans for social and economic transformation suffered a setback after the assassination of Washington Post columnist Jamal Khashoggi by Saudi agents within the country's consulate in Istanbul last year.

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