Saudi Aramco benefited from higher crude oil prices in 2022 and the state-owned company’s net profit surged to $161.1 billion in the year which is the highest-ever annual profit by any company.
To put that number in perspective, Apple, which is the most valuable company globally, posted a net profit of just under $100 billion in its fiscal year 2022 which ended in September 2022. Microsoft’s net income was $72.7 billion in its fiscal year 2022 which ended in June.
Looking at the US markets, energy giant ExxonMobil reported a net profit of $55.7 billion in 2022. Together, ExxonMobil, Chevron, BP, Shell, and TotalEnergies made almost a $200 billion profit in 2022.
All said, in 2022, Aramco made over thrice the profits that ExxonMobil made. Despite the risen in oil demand, the OPEC+ bloc announced a production cut late last year in order to support energy prices.
While many advocacy groups and the Biden administration have lashed out at energy giants for the windfall profits, which in part are due to the Russia-Ukraine war, investors in energy companies reaped the rewards in 2022.
The Energy Select Sector Fund ETF gained 64% in 2022. Incidentally, barring energy, all the sectors of the S&P 500 saw negative returns in 2022.
Berkshire Hathaway chairman Warren Buffett also loaded up on energy names like Chevron and Occidental Petroleum in 2022. Recent regulatory filings show that Berkshire Hathaway added more Occidental shares in 2023-check our guide on buying energy stocks in 2023.
Saudi Aramco Posted Record 2022 Profits- Here are the Key Takeaways
Coming back to Saudi Aramco, it produced 13.6 million barrels of oil equivalent per
day (mmboed) in 2022. The company generated free cash flows of $148.5 billion in 2022 and spent $37.6 billion on capex.
Aramco has a progressive dividend policy and in Q4 2022 it paid $19.5 billion as dividends, which is 4% higher than the previous quarter. Most energy companies are paying generous dividends to investors amid the surge in earnings.
ExxonMobil, for instance, has a dividend yield of 3.4% which is almost twice that of the S&P 500.
Notably, many energy companies suspended their dividends in 2020 amid the plunge in oil prices. That year, the WTI (West Texas Intermediate) futures turned negative briefly. However, oil prices recovered in 2021 and continued to rise in the first half of 2022 and hit the highest level since 2008.
Being the world’s largest energy company, Aramco reaped the benefits of higher oil prices. Like fellow energy giants, it is also investing in sustainable energy.
In October, it established a $1.5 billion Sustainability Fund “to invest in technology needed to support a stable and inclusive energy transition.”
Saudi Arabia is Pivoting to Green Energy
Aramco is majority owned by Saudi Arabia. The kingdom is also pivoting to green energy, especially betting on EVs (electric cars).
In November, Saudi Arabia announced a joint venture with Foxconn for EV production. As part of the agreement, Saudi Arabia’s sovereign wealth fund PIF (public investment fund) and Foxconn would form a joint venture under the name Ceer, which would sell EVs under the same brand.
Notably, this is not the first time that Saudi Arabia is investing in an EV venture. It is the biggest shareholder of Lucid Motors, the US-based EV company that went public last year.
PIF also participated in the PIPE (private investment in public equity) transaction when Lucid Motors merged with Churchill Capital in 2021.
There were rumors that PIF is considering taking Lucid Motors private. While Lucid Motors stock rallied on the reports none of the parties have neither confirmed nor denied the reports.
As for Aramco, the stock currently trades only on the Saudi Arabia stock exchange-check our guide on how to buy stocks in Saudi Arabia.
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