Bank of America (BofA) predicted a decline in quarter-on-quarter earnings for Saudi Aramco, which is set to report results on November 1st, citing a drop in refining margins from the previous quarter, Rigzone reports, citing documents obtained from BofA Global Research.
While BofA expects Aramco revenues to be up 35% year-on-year, quarter-on-quarter earnings are expected to drop by 16%, Rigzone cited the BofA report as noting.
At the same time, EBITDA is expected to jump 33% YoY and drop 9% quarter-on-quarter, with net income poised to come in at a 36% YoY jump but a 9% quarter-on-quarter decline.
"We expect that downward pressure on earnings from lower oil prices during the quarter will be mostly made up by higher production volumes. We also believe that most of QoQ downside is explained by a sharp deceleration of the refining margins from Q2 peaks and associated inventory losses," Rigzone cited BofA as saying.
The numbers still look sharp for Aramco, which is also expected to generate nearly $38 billion in free cash flow, though this represents a slower capex ramp-up than anticipated. BofA now sees capex coming in "at the lower end" of Aramco's $40-$50-billion guidance for the year-end, but also sees the Saudi oil giant achieving "a net cash position already in Q3".
Last quarter, Aramco's net income came in at $48.4 billion.
Saudi Aramco is also planning an IPO for its energy-trading business, eyeing a listing in Riyadh either later this year or early next year, according to Bloomberg, and is currently adding more banks to the initial public offering. No final decisions have yet been made.
The valuation of the energy-trading unit could be upwards of $30 billion, Bloomberg said, citing sources "familiar with the matter".
Earlier this month, Saudi Aramco CEO Amin Nasser said the world was misinterpreting the oil markets and focusing too narrowly on short-term economics while ignoring supply fundamentals.
Nasser warned that spare capacity is low and could be decimated if China eases its zero-COVID policies.
By Charles Kennedy for Oilprice.com
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