It was an oil company annual earnings call like any other, replete with pledges to reduce emissions, commitments to diversity, ESG and sustainable development. Except this was no ordinary oil company, because Saudi Aramco is no ordinary company — oil or otherwise..The world’s largest state owned entity, and second largest company by market capitalization after Apple, surprised no one this Sunday — the first day of its workweek — in announcing $161 billion in profits, vastly exceeding its peer group. As the linchpin of the OPEC cartel, Aramco really doesn’t have a peer group. It’s pretty much in a class by itself, far exceeding any average ExxonMobil or Chevron..The results were underpinned by stronger crude oil prices, higher volumes sold and improved margins for refined products, the company said in an otherwise typical news release. It continues to strengthen its oil and gas production capacity, as well as its downstream portfolio, to meet anticipated future demand, it added..“Our focus is not only on expanding oil, gas and chemicals production, but also investing in new lower-carbon technologies with potential to achieve additional emission reductions — in our own operations and for end users of our products,” said President & CEO Amin H. Nasser..The company said it produced about 11.5 million barrels per day (bpd) in 2022, or almost three times more than all of Canada. The number seems at odds with official output figures from the likes of the International Energy Agency (IEA) which pegs it at about 10 million bpd, but Saudi maintains a level of unused surplus capacity it uses to swing oil markets, so that much isn’t a big surprise..What was surprising is how far it's come in adopting western reporting standards in only its third year as a publicly traded company. .That comes with a kicker, however; Aramco shares can’t be listed in New York (or Toronto) because it doesn’t meet Securities Exchange Commission (SEC) rules for disclosing reserves. North American oil companies have to perform third-party engineering to evaluate reserves and production as a condition of listing. .Aramco never has and likely never will, which is why you’re unlikely to have any of its shares in your retirement portfolio. It’s not clear whether you’d want to, given Mohammed bin Salman Al Saud — MBS — is essentially chairman of the board. One can only guess what the penalty is for missing performance metrics..The House of Saud insists it keeps out of the business affairs of its Crown jewel, and indeed, Aramco enjoys a degree of autonomy that isn’t granted to other Saudi businesses. Women, who make up more than half of the company’s workforce, aren’t required to cover up on company property and can have coffee with their male colleagues without fear of reprisal. They’ve always been allowed to drive company vehicles. Company execs have been known to sip wine at company functions, although the practice isn’t encouraged or condoned..And the company remains relatively unaccountable to its shareholders, even by Western standards. Analyst queries to upper management were often politely rebuffed; ‘we don’t disclose that’ was the reply to one London-based bean counter who asked the CFO about how the company calculated its dividend. There aren’t many analysts in this town — or any other — that would take that for an answer. .Although it declared a $19-billion dividend, analysts complained it’s small compared to the amount of cash on its balance sheet..And there aren’t many companies in this town that would invest in spare production capacity to have it sit idle. Aramco is using all those spare greenbacks to embark on the largest capital program in its history, it plans to spend a staggering $55 billion in 2023 to increase capacity to 13 million bpd. On the conference call, Nasser said Aramco sees Chinese demand increasing as much as 1.5 million bpd over the next year if conditions remain favourable. .That’s a bullish number, but Aramco isn’t often wrong, given it manages demand as well as supply. And that’s an advantage Canadian — or American — companies just don’t have..“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of under-investment in our industry are real — including contributing to higher energy prices,” he said..There was talk of Canada joining OPEC or acting as an affiliate at some point a few years back, but it's always always been rebuffed and never taken seriously. Price fixing in this country is considered anti-competitive behaviour..That’s the difference between being a price taker and a price maker.
It was an oil company annual earnings call like any other, replete with pledges to reduce emissions, commitments to diversity, ESG and sustainable development. Except this was no ordinary oil company, because Saudi Aramco is no ordinary company — oil or otherwise..The world’s largest state owned entity, and second largest company by market capitalization after Apple, surprised no one this Sunday — the first day of its workweek — in announcing $161 billion in profits, vastly exceeding its peer group. As the linchpin of the OPEC cartel, Aramco really doesn’t have a peer group. It’s pretty much in a class by itself, far exceeding any average ExxonMobil or Chevron..The results were underpinned by stronger crude oil prices, higher volumes sold and improved margins for refined products, the company said in an otherwise typical news release. It continues to strengthen its oil and gas production capacity, as well as its downstream portfolio, to meet anticipated future demand, it added..“Our focus is not only on expanding oil, gas and chemicals production, but also investing in new lower-carbon technologies with potential to achieve additional emission reductions — in our own operations and for end users of our products,” said President & CEO Amin H. Nasser..The company said it produced about 11.5 million barrels per day (bpd) in 2022, or almost three times more than all of Canada. The number seems at odds with official output figures from the likes of the International Energy Agency (IEA) which pegs it at about 10 million bpd, but Saudi maintains a level of unused surplus capacity it uses to swing oil markets, so that much isn’t a big surprise..What was surprising is how far it's come in adopting western reporting standards in only its third year as a publicly traded company. .That comes with a kicker, however; Aramco shares can’t be listed in New York (or Toronto) because it doesn’t meet Securities Exchange Commission (SEC) rules for disclosing reserves. North American oil companies have to perform third-party engineering to evaluate reserves and production as a condition of listing. .Aramco never has and likely never will, which is why you’re unlikely to have any of its shares in your retirement portfolio. It’s not clear whether you’d want to, given Mohammed bin Salman Al Saud — MBS — is essentially chairman of the board. One can only guess what the penalty is for missing performance metrics..The House of Saud insists it keeps out of the business affairs of its Crown jewel, and indeed, Aramco enjoys a degree of autonomy that isn’t granted to other Saudi businesses. Women, who make up more than half of the company’s workforce, aren’t required to cover up on company property and can have coffee with their male colleagues without fear of reprisal. They’ve always been allowed to drive company vehicles. Company execs have been known to sip wine at company functions, although the practice isn’t encouraged or condoned..And the company remains relatively unaccountable to its shareholders, even by Western standards. Analyst queries to upper management were often politely rebuffed; ‘we don’t disclose that’ was the reply to one London-based bean counter who asked the CFO about how the company calculated its dividend. There aren’t many analysts in this town — or any other — that would take that for an answer. .Although it declared a $19-billion dividend, analysts complained it’s small compared to the amount of cash on its balance sheet..And there aren’t many companies in this town that would invest in spare production capacity to have it sit idle. Aramco is using all those spare greenbacks to embark on the largest capital program in its history, it plans to spend a staggering $55 billion in 2023 to increase capacity to 13 million bpd. On the conference call, Nasser said Aramco sees Chinese demand increasing as much as 1.5 million bpd over the next year if conditions remain favourable. .That’s a bullish number, but Aramco isn’t often wrong, given it manages demand as well as supply. And that’s an advantage Canadian — or American — companies just don’t have..“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of under-investment in our industry are real — including contributing to higher energy prices,” he said..There was talk of Canada joining OPEC or acting as an affiliate at some point a few years back, but it's always always been rebuffed and never taken seriously. Price fixing in this country is considered anti-competitive behaviour..That’s the difference between being a price taker and a price maker.
