Aramco Q3 supported by higher volumes, better downstream margins – Citi
Saudi Aramco's Q3 net income of $26 billion was broadly in-line with market expectations driven by higher volumes and refining availability in what was an improved margin environment, said Citi.
Oil and gas volumes which increased by 4% quarter-on-quarter (qoq) combined with better downstream margins and availability, Citi analyst Alastair R Syme and others said in a note.
Cash conversion remained healthy and continues to afford plenty of financial flexibility, they said.
Capex guidance is trimmed to the low end of the range of $52-55 billion from $52-58 billion) and suggests that the growth capex plan is probably peaking into next year.
“The equity has recovered from the September lows and still offers a healthy spread vs its own debt (+110 bps). The challenge, however, is a 2026 oil balance that points to price deflation from here and offers little window to add further barrels back,” the note said.
Global oil prices have declined 13% this year to about $65 a barrel, well below the $90 per barrel that the IMF has estimated Saudi Arabia requires to balance its budget.
On Sunday, OPEC+ agreed to a small oil output increase for December and a pause in production hikes in the first quarter of next year.
Citi has a target price of 25.50 riyals ($6.80) on Aramco.
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