Saudi Aramco Records Highest Ever Profits on Way to $100B IPO

Investors are very excited about the possibility of an initial public offering for Gulf energy behemoth Saudi Arabian Oil Company (Aramco) at some point in 2020-2021, and for good reason. Aramco could be on its way toward a valuation of a staggering $2 trillion, setting the stage for the biggest stock market flotation ever to hit the Wall Street.

As the state-run Aramco prepares to woo investors before offering 5% shares for $100 billion – dwarfing the $25 billion Alibaba BABA IPO in 2014 – it published its first-ever half-year financial results. For the six months that ended Jun 30, Aramco reported a slight decline in profits due to lower oil prices but net income – at $46.9 billion – still eased past the $20 billion+ for the likes of Microsoft MSFT and Apple Inc. AAPL during the same period. The so-called ‘Big Oil’ companies are further down the pecking order.

Let’s see Saudi Aramco’s self-reported financials for the first half of 2019 and how they compare with U.S.-based energy behemoths ExxonMobil XOM and Chevron CVX plus the European major Royal Dutch Shell plc RDS.A.

Saudi Aramco

According to the latest financial results of Aramco, in the six months from January 2019 to June 2019, the world’s largest oil company generated net income of $46.9 billion on revenues of $146.9 billion. Oil production averaged 10 million barrels per day. During the quarter, the Damman-based entity paid over $46 billion in dividends to its shareholder – the Kingdom of Saudi Arabia – including a special dividend of $20 billion. Meanwhile, the state-run titan raked in an astounding $38 billion in free cash flow.

ExxonMobil

ExxonMobil earned net income of $5.5 billion for the six months ended Jun 30, 2019. Revenues for the half-yearly period totaled $132.7 billion. America's No. 1 energy producer churned out an average of 3.945 million oil-equivalent barrels per day (MMBOE/d). The Irving, TX-based company’s free cash flow turned negative after paying dividends worth $7.2 billion to its shareholder during the half-yearly period.

Chevron

Chevron reported net income of $7 billion, while revenue for the six months totaled $74.1 billion. The San Ramon, CA-based energy giant’s total production of crude oil and natural gas was 3.061 MMBOE/d. Chevron – carrying a Zacks Rank #3 (Hold) – paid out $4.5 billion in dividends in the first half. Free cash flow came in at around $4 billion.

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Royal Dutch Shell

Europe’s largest oil company reported earnings (on a current cost of supplies basis, excluding items - the market’s preferred measure) of $9 billion on revenues of $177.5 billion. The Hague-based Shell’s upstream volumes averaged 2.778 MMBOE/d. Shell paid dividends worth $7.7 billion to its shareholder during the half-yearly period. Free cash flow for the period totaled $10.9 billion.

Final Thoughts

It’s quite clear that Aramco's half-yearly numbers are a testament to the company's unmatched scale and earnings prowess. While there are certain apprehensions regarding Aramco's dividend payouts to the Saudi government, the latest financial results certainly tell us how sustainable the company’s business actually is – even in the face of the ongoing commodity price uncertainty.

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