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Saudi Aramco Is World’s Most Profitable Company, Beating Apple by Far Saudi Aramco Is World’s Most Profitable Company, Beating Apple by Far
(about 2 hours later)
The earnings of Saudi Aramco, Saudi Arabia’s giant oil company, have long been a mystery because the company is owned by a government that has kept the information under wraps. But on Monday, Aramco opened its books, revealing that the company generated $111.1 billion last year, making it probably the world’s most profitable company by far. The earnings of Saudi Arabia’s giant oil company have long been a mystery, kept under wraps by the country’s government. But on Monday, Saudi Aramco opened its books, revealing that it generated $111.1 billion in net income last year, making it probably the world’s most profitable company by far.
It handily beat Apple ($59.5 billion in net income in 2018) and Alphabet, the parent company of Google ($30.7 billion), and ran laps around other oil companies like Royal Dutch Shell ($23.9 billion) and Exxon Mobil ($20.8 billion). It handily beat Apple ($59.5 billion in net income in 2018) and ran laps around other oil companies like Royal Dutch Shell ($23.9 billion) and Exxon Mobil ($20.8 billion).
The disclosure reveals a company that is hugely profitable but also tightly bound to one country and the price of oil. Aramco issued the financial data as it prepares to borrow up to $15 billion through a bond sale, in what could signal a more aggressive approach to capital-raising for both the company and Saudi Arabia. The disclosure reveals a company that is hugely profitable but also tightly bound to one country and the price of oil.
Saudi Aramco issued the financial data because it is preparing to borrow up to $15 billion in bonds in what could be a more aggressive approach to capital-raising for the company and for Saudi Arabia. The money will help finance Aramco’s $69 billion purchase, announced Friday, of most of Saudi Basic Industries, or Sabic, a major petrochemical company. Aramco will be buying the stake from Saudi Arabia’s sovereign wealth fund, whose chairman is Crown Prince Mohammed bin Salman.
Aramco wants the money to help finance its purchase, announced Friday, of most of Saudi Basic Industries, a major petrochemical company known as Sabic, for about $69 billion. Aramco will be buying the stake from Saudi Arabia’s sovereign wealth fund, whose chairman is Crown Prince Mohammed bin Salman. The crown prince, who is the kingdom’s main economic policymaker, wants to ease the economy’s dependence on oil and gas revenue through investments in technology companies like Uber. A planned stock sale by Aramco — which the Saudis hoped would be the largest initial public offering on record — was expected to raise money for that purpose. The I.P.O. was postponed last year, and the sale of the Sabic stake, appears to be an alternative way of raising the funds.
The crown prince, who is the kingdom’s main economic policymaker, wants to ease the economy’s dependence on oil and gas revenue through investments in technology companies like Uber. A planned offering of part of Aramco — which would have been the largest initial public offering on record — was expected to raise money for that purpose. That I.P.O. was postponed last year, and the issuing of bonds appears to be an alternative way to raise money. While the crown prince pursues these investments and tries to recover from the political fallout caused by the killing of the Saudi journalist Jamal Khashoggi last year, Aramco also appears to be trying to make itself into a broader energy producer and, thus, more attractive if the government decides once again to try to sell a slice of the company.
While the crown prince pursues these investments and tries to recover from the political fallout caused by the killing of the Saudi journalist Jamal Khashoggi last year, Aramco also appears to be trying to make itself into a broader energy company and, thus, more attractive if the government decides once again to try to sell a slice of the company.
Aramco’s chief executive, Amin Nasser, has said that the company is pursuing international acquisitions in areas like liquefied natural gas, a chilled fuel that can be transported globally on ships like oil.Aramco’s chief executive, Amin Nasser, has said that the company is pursuing international acquisitions in areas like liquefied natural gas, a chilled fuel that can be transported globally on ships like oil.
For investors, one persistent concern about Aramco is its ties to the Saudi government. “Unlike Exxon and Chevron, its revenue streams are highly dependent on a single country that could face real instability risks,” Ayham Kamel, an analyst at Eurasia Group, a consulting firm, wrote in a recent note to clients. The financial results also serve to show how the company is tied to oil prices. In 2016, for instance, a time of low prices, the company reported only $13.3 billion in net income.
But analysts said that the numbers revealed on Monday showed that Aramco had plenty of firepower for more deals. For investors, Aramco’s ties to the Saudi government are also a persistent concern. “Unlike Exxon and Chevron, its revenue streams are highly dependent on a single country that could face real instability risks,” Ayham Kamel, an analyst at Eurasia Group, a consulting firm, wrote in a recent note to clients.
But analysts said that the financial information revealed on Monday showed that Aramco had plenty of firepower for more deals.
Aramco has “a huge amount of room” to issue debt, said David G. Staples, a managing director at Moody’s Investors Service, which issued a credit rating for Aramco on Monday.Aramco has “a huge amount of room” to issue debt, said David G. Staples, a managing director at Moody’s Investors Service, which issued a credit rating for Aramco on Monday.
Mr. Staples and a colleague, Rehan Akbar, noted that the company had already achieved enormous size and profitability without borrowing or selling stock to investors. In 2018, Aramco paid about $160 billion to the government in dividends, taxes and royalties.Mr. Staples and a colleague, Rehan Akbar, noted that the company had already achieved enormous size and profitability without borrowing or selling stock to investors. In 2018, Aramco paid about $160 billion to the government in dividends, taxes and royalties.
The financial results also show how the company and Saudi Arabia are tied to oil prices. In 2016, for instance, a time of low prices, the company reported only $13.3 billion in net income.
Moody’s attributed Aramco’s profitability in part to economies of scale stemming from enormous production volumes extracted from oil and gas assets of unmatched size. Aramco has some of the world’s largest oil fields, leading to very low costs.Moody’s attributed Aramco’s profitability in part to economies of scale stemming from enormous production volumes extracted from oil and gas assets of unmatched size. Aramco has some of the world’s largest oil fields, leading to very low costs.
“Aramco’s scale of production in combination with its vast hydrocarbon resources is a very strong competitive advantage,” Moody’s analysts wrote.“Aramco’s scale of production in combination with its vast hydrocarbon resources is a very strong competitive advantage,” Moody’s analysts wrote.
The prospectus reveals some long-hidden details about the size of Saudi Arabia’s oil fields. Chief among these is a monster called Ghawar, which extends for about 120 miles in the eastern part of the country. The world’s largest oil field, according to the prospectus, Ghawar has accounted for more than half of Saudi Arabia’s cumulative production yet it still has reserves of 48 billion barrels and is capable of producing nearly four million barrels a day, both more than all but a handful of countries.The prospectus reveals some long-hidden details about the size of Saudi Arabia’s oil fields. Chief among these is a monster called Ghawar, which extends for about 120 miles in the eastern part of the country. The world’s largest oil field, according to the prospectus, Ghawar has accounted for more than half of Saudi Arabia’s cumulative production yet it still has reserves of 48 billion barrels and is capable of producing nearly four million barrels a day, both more than all but a handful of countries.
The oil wealth doesn’t stop there. The kingdom has four more fields that dwarf almost any other. The oil wealth doesn’t stop there. The kingdom has four more fields that dwarf most others.
Aramco produced 13.6 million barrels per day in 2018 on average, more than three times the 3.8 million barrels per day reported by Exxon Mobil, according to the report. Overall, its revenue was about $360 billion.Aramco produced 13.6 million barrels per day in 2018 on average, more than three times the 3.8 million barrels per day reported by Exxon Mobil, according to the report. Overall, its revenue was about $360 billion.
Moody’s wrote that Aramco was “conservatively managed” with “very low debt levels.”Moody’s wrote that Aramco was “conservatively managed” with “very low debt levels.”
Mr. Staples said that based on his conversations with Aramco officials, he expected this careful approach to debt to continue, a policy that would likely find favor with investors if the Saudi government decides to revive its I.P.O. plans.Mr. Staples said that based on his conversations with Aramco officials, he expected this careful approach to debt to continue, a policy that would likely find favor with investors if the Saudi government decides to revive its I.P.O. plans.
The agency rated the company A1, a strong rating but below that of large Western oil companies including Exxon Mobil and Shell. Mr. Staples said the lower rating reflected the concentration of most of Aramco’s operations in Saudi Arabia, which shares the same credit rating, and the government’s dependence on oil and gas revenue.The agency rated the company A1, a strong rating but below that of large Western oil companies including Exxon Mobil and Shell. Mr. Staples said the lower rating reflected the concentration of most of Aramco’s operations in Saudi Arabia, which shares the same credit rating, and the government’s dependence on oil and gas revenue.
The thinking is that if Saudi Arabia were to encounter political instability or hard times, the oil company would feel the impact. “We have to take into account the risk profile” of the country, he said.The thinking is that if Saudi Arabia were to encounter political instability or hard times, the oil company would feel the impact. “We have to take into account the risk profile” of the country, he said.
The company, founded by United States oil companies (Aramco is short for Arabian American Oil Company), was nationalized by the Saudi government in the 1970s.The company, founded by United States oil companies (Aramco is short for Arabian American Oil Company), was nationalized by the Saudi government in the 1970s.
In its prospectus, Aramco listed some of the risks and drawbacks that if faced in its operations. The Saudi government, for instance, determines how much oil Saudi Aramco should produce “based on its sovereign energy security goals or for any other reason.” The company also may face litigation over climate change or antitrust issues stemming from its membership in the Organization of Petroleum Exporting Countries, especially in the United States, Aramco’s prospectus said.In its prospectus, Aramco listed some of the risks and drawbacks that if faced in its operations. The Saudi government, for instance, determines how much oil Saudi Aramco should produce “based on its sovereign energy security goals or for any other reason.” The company also may face litigation over climate change or antitrust issues stemming from its membership in the Organization of Petroleum Exporting Countries, especially in the United States, Aramco’s prospectus said.