Aramco Earnings: Leverage Increases as Cash Flow Doesn’t Cover Dividend

Wide-moat Aramco reported second-quarter net income of $29.1 billion compared with $30.1 billion the year prior, primarily due to lower volumes and weaker downstream results, which offset higher price realizations. Total hydrocarbon volumes fell to 12.3 million barrels of oil equivalent per day from 13.5 mmboe/d in the corresponding period last year. Refining and chemical margins remained weak relative to the year before, sending the segment to a $262 million loss from earnings of $788 million last year. With no changes to our forecasts, we maintain our SAR 30.00 fair value estimate.