Saudi Aramco Base Oil Co. Luberef posted first-half net income of 992 million Saudi riyals (U.S.$264.5 million), up 113% from 467 million riyals a year earlier, as base oil crack margins surged to their highest level in the company’s history, according to an investor presentation.
Revenue increased 27% to 5.58 billion riyals from 4.38 billion, despite a 5% decline in base oil sales volumes to 553,000 metric tons. The average base oil crack margin rose 49% to 2,732/ riyals per ton from 1,828/ton. In the second quarter of, the margin reached 3,625/ton, up 91% from 1,893/ton a year earlier.
The first-half margin was based on a base oil price of about 4,789/ton and feedstock cost of 2,057/ton, compared with a historical average margin of 1,798/ton.
The strong margin environment has influenced Luberef’s plans for its Yanbu refinery. The company has moved a planned shutdown to October to advance its Growth II project, which is targeted to come on stream in H1 2027. Luberef expects to spend 300 million to 350 million riyals on Growth II in 2026, including 119 million in H1.
Base oil sales revenue increased 25% to 2.86 billion riyals despite the volume decline, while by-product revenue rose 30% to 2.72 billion.
Q2 base oil sales volumes increased 2% to 313,000 tons, while revenue jumped 52% to #3.42 billion riyals. Net income rose 199% to 734 million and EBITDA increased 165% to 847 million.
H1 cost of revenue increased 16.5% to 4.39 billion riyals, with materials accounting for 3.93 billion. Gross profit reached about 1.19 billion riyal, compared with 608 million a year earlier, while operating profit more than doubled to 1.01 billion.
Saudi Arabia remained Luberef’s largest market, generating 3.54 billion riyals of H1 revenue, or about 64% of the total. The UAE generated 744 million, India 517 million and South Africa 351 million.
For 2026, Luberef is targeting 1.15 million tons of base oil sales, with the domestic market expected to account for about 30%. Domestic premiums are expected at 375 to 750 riyal per ton, while export pricing is based on destination.
Luberef’s stronger margins also sharply improved cash generation.
Free cash flow reached 1.06 billion riyals in H1, up 346% from 238 million, while operating cash flow nearly tripled to 1.37 billion riyalls from 459 million. Cash conversion increased to 90% from 39%.
The company ended June with Riyals 1.75 billion of cash, up 27% from Riyals 1.37 billion at the start of the year. It spent 302 million riyals on capital expenditure and paid 589 million in dividends.
Luberef reported negative gearing of 20%, compared with positive gearing of 4% a year earlier, while ROACE increased to 33% from 21%.
Luberef spent 302 million riyal on capital expenditure in H1, up from 221 million a year earlier. Growth spending accounted for 119 million riyals, compared with 113 million in H1 2025, while turnaround spending jumped to 133 million from 17 million.
The company’s decision to push the Yanbu shutdown into October comes as its existing base oil operations are generating unusually strong returns. With H1 volumes down 5% but the average crack margin up 49%, the earnings improvement has been driven overwhelmingly by value rather than volume.