Aramco’s refineries and bypass routes turned the oil shock into a 34.5% profit jump

Record refining margins and higher oil prices lifted Saudi Aramco’s 3Q bottom line, as net income rose 34.5% y-o-y to USD 36.3 bn, bringing 9M net income up 34.2% to USD 101.5 bn, according to its earnings release (pdf). Revenue climbed 20.3% y-o-y to USD 123.8 bn during the quarter and rose 15.2% to USD 359.5 bn in 9M.

The crisis played to Aramco’s assets: Its own refineries captured record margins as diesel and jet fuel ran short, and its pipeline links kept crude moving outside Hormuz, even as the conflict cut its output and the global tanker fleet shrank.

Higher prices made up for lower volumes: Aramco’s average realized crude price was USD 95.2 a barrel, up from USD 70 a year earlier but down from USD 108 in 2Q. Total liquids production averaged 8.7 mn bbl / d against 10.8 mn a year earlier, down roughly a fifth, as blockades, strikes, and tensions restricted output and shipments.

A one-off sale padded the headline: Selling its 50% stake in Malaysia’s PRefChem refining and petrochemicals ventures to Petronas added around USD 7 bn to unadjusted net income, CFO Ziad Al Murshed told analysts. Adjusted net income, which strips that out, rose 9% to USD 31.2 bn, still ahead of the USD 30.7 bn median analyst estimate.

Refining carried the rest: Downstream adjusted earnings before interest and taxes (EBIT) hit a record USD 10.3 bn, up 234% y-o-y and more than USD 4 bn above 2Q, as shortages of diesel and jet fuel pushed global refining margins sharply higher. Routing 51% of its crude into its own downstream operations let Aramco capture more of those margins than it could have from crude exports alone. Upstream adjusted EBIT fell 9% y-o-y to USD 46.8 bn on lower volumes.

Aramco’s bypass routes kept crude moving: The East-West Pipeline, Mediterranean export links, and ship-to-ship transfers outside Hormuz lifted production by around 1.1 mn bbl / d from 2Q. September was its strongest month since the conflict began.

Tankers are the other bottleneck: Longer voyages, tanker shortages, and attacks on vessels have cut the global tanker fleet’s effective capacity by around 40%, CEO Amin Nasser said on Tuesday’s earnings call. Rerouting accounts for about 25 points of that and attacks a further 15. Freight costs are running at roughly 15 times pre-conflict levels.

Inventories will take years to rebuild: More than 3 bn bbl of liquids supply has been lost since the conflict began, Nasser said. Alternative routes, strategic reserve releases, and demand management have narrowed the cumulative deficit to around 2 bn bbl. Most of the rest has come from drawing down commercial stocks and lower consumption, which he said cannot continue indefinitely. “The world is starting the ninth month now of a historically unprecedented supply shock,” Nasser said. Even if normal flows resumed immediately, refilling depleted inventories could take up to two years.

Cargo handling carries SAL

SAL Saudi Logistics Services’ net income rose 28.2% y-o-y to SAR 231.9 mn in 3Q on record revenue up 37.5% at SAR 579.3 mn, according to a Tadawul disclosure and an earnings release (pdf). Cargo ground handling provided SAR 504 mn of that, rising 35% as activity recovered from the regional disruption, while logistics revenue rose 53.1%. Nine-month net income rose 16.9% to SAR 579.9 mn on revenue up 28.2% at SAR 1.54 bn, with earnings trailing revenue on expansion investment, higher finance costs and a SAR 26 mn operating loss in logistics.