Saudi Arabian Oil Company ($2222)

Welcome to the Saudi Aramco's First Quarter 2026 Results Call. [Operator Instructions]. I shall now hand over to Mr. Peter Hutton to begin.

Hello, and welcome to Saudi Aramco's First Quarter 2026 Earnings Call. I'm Peter Hutton, Head of Investor Relations at Aramco, and I'm pleased to be joined today by Mr. Amin Nasser, President and CEO; Mr. Ziad Al-Murshed, Executive Vice President and CFO. Today, we will provide a detailed update followed by a question-and-answer session. We expect the call to last around an hour. Please refer to this cautionary statement on forward-looking information or regulatory filings and our website for more details. With that, I hand the call over to Amin.

Thank you, Peter, and welcome, everyone, and thank you for joining us. Before highlighting the very strong operating and financial performance, which Aramco delivered in the first quarter, I would like to comment on the regional landscape. The energy supply shock that began in the first quarter is the largest the world has ever experienced. By this, Aramco delivered with a high level of resilience undermined by dedicates of long-term strategic planning, design flexibility in both our domestic and international assets and operational excellence. We have been able to take timely action thanks to years of contingency planning, our focus on safety, and the ability of our people to adopt new solutions, as I will outline. We acted quickly, as highlighted in our recent earnings call in March. Our company's flexibility is a key ever in our risk mitigation and business continuity, enabling Aramco to optimize crude production across our portfolio. For example, to prioritize lighter grades and maximize production from key assets. The East-West Pipeline was a major strategic investment conceived almost 5 decades ago. In both maintaining it with the highest standard and ramping this up to capacity of 7 million barrels per day, Aramco managed to transform around 80 years of supply and export operational modes in just 8 days. We have further increased our ability to meet deliveries. For example, by utilizing new crude export outlet at [indiscernible] and reversing infrastructure to supply crude some West Coast refineries. The strategic decision taken more than a decade ago to localize our supply chain provides an exceptional ability to respond quickly. We were able to restore [ Hawiyah ] gas plant operation in less than 24 hours and brought race facility back online in less than 2 days. About 99% of the materials used to restore disruptions to operations have been sourced through our local supply chain. Without this, lead times would typically have been for 12 months. And this resilience is equally applicable in gas with the decision to invest in significant storage allowed sales gas to be delivered to customers even during disruptions at some facilities. Throughout the conflict, we have continued to learn lessons. If you [ and adopt ], this is a key part of our corporate philosophy to improve every element of our business and make us stronger than ever before. Where we have reduced production on some fields, we have been able to resume previous production volumes within days. This reflects the way we manage fields and our highly advanced monitoring as part of the 10 billion data [indiscernible] per day we track across our operations. And if required, our administrative experience in increasing production indicates, we can expect to reach our maximum sustainable capacity of 12 million barrels per day in less than 3 weeks. The macro environment is fast moving characterized by many moving and uncertain parts. However, the global economy remains resilient with the latest first quarter world GDP growth estimates at 2.7%, relatively unchanged since the conflict. And for full year 2026, the GDP growth outlook is down slightly at 2.4%. The severe supply disruptions has starkly underlined the central importance of oil and gas to the world. This is a supply-led not a demand-driven crisis. The market has seen an unprecedented supply loss of about 1 billion-barrel of oil that was partially offset mainly by alternative flows by [indiscernible], strategic with volume reserves released by government and the utilization of Aramco's East-West Pipeline to divert the oil deliveries. Despite higher prices, there has not been increased production from outside the Arabian Gulf. If the Strait of Hormuz opens today, it will still take months for the market to rebalance and if its opening is delayed by a few more weeks than normalization will last into 2027, and further amplifying our consistent view of the need to restore materially depleted inventory levels. Solidness in physical markets is evident in stronger refining margins across key regions and refined products, especially diesel and jet fuels. Demand remains healthy as we head into the second half of the year, undermined by aviation demand, strategic reserve [ reblishment ] and the upcoming driving season. It's also very clear that there continues to be a robust demand for crude and the need for strong supplies of low-cost, lower carbon intensity barrels. Aramco is well positioned to navigate this environment, supported by our attractive and highly demanded crude slates. Our flexibility and operational resilience enable us to meet customer expectation while reinforcing the critical importance of stable crude supplies in a volatile landscape. Despite the significant activity and focus on delivering effectively in these present circumstances, our long-term strategy remains on track and our financial even more robust. Our major projects are progressing well, including Jafurah Phase 2, which is on schedule for completion in 2027. This will add to our strong gas growth momentum. We delivered a strong and be a leading start to 2026 with first quarter adjusted net income of $33.6 billion, $18.6 billion free cash flow, an ROIC of 20.7%, which is around double the IOC's average. We produced 12.6 million barrels of oil equivalent per day, up 0.3 million barrels year-on-year. With lifting costs at $3.50 per barrel, we are 50% lower than the IOC's average and continue to drive cost leadership and generate robust cash flows. It's worth noting that we still have available capacity and under our rule of thumb analysis, every million barrel per day could add around $10 billion to $11 billion in annualized operating cash flow based on 2025 average print prices. Our gas program remains on track to deliver around 80% sales gas production capacity growth by 2030 compared to 2021 levels. which we expect to contribute $12 billion to $15 billion in incremental operating cash flows subject to demand. In downstream, we maintained our high availability and throughput, allowing us to maintain an optimal promotion of our crude utilized within our downstream system and capture strong refining margins. Our integration and transformation programs are on track to unlock value, supporting the goal of $8 billion to $10 billion in incremental operating cash flow with the aim of up to 4 million barrels per day of liquid to chemical capacity in petrochemical reducing complexes in the long term. Our continued delivery to our customer and investors underpin our confidence in delivering long-term shareholder value. With our sustainable and progressive base dividend and the $2 billion to $3 billion share buyback announced in March, which also supports our employees share repurchase plan. Our technology and AI capabilities where we have captured $11.3 billion in technology realized value since 2023 and our supply chain resilience and our lowest upstream carbon intensity in the industry underscore our strategic focus and reinforce around its position as a leader in the industry with a strong outlook for the future. Let me hand over to Ziad to highlight how our first quarter results underpin disposition.

Thank you, Amin, and welcome, everyone. Amin has talked in some detail about the high quality and flexibility of our operations and long-term perspective. Our financial strength matches and supports those attributes and advantages. We have the strongest balance sheet in the sector with an exceptionally strong cash position of $75.2 billion and a balance sheet gearing ratio of just 4.8% at the end of Q1, the lowest versus our peers. Even with a strong investment program underway, our capital spending as a percentage of operating cash flow remains the lowest among our IOC peers. That's a clear sign of our efficiency and disciplined approach to capital allocation. Aramco offers investors earnings visibility with high returns on capital. Our 12-month rolling ROACE was 20.7%, and our rule of some analysis on potential impact of price and volumes provides a welcome predictability, especially in uncertain times. We continue to add new funding sources to our existing instruments, including bonds, [ to cook ] and commercial paper to further strengthen our financial agility. We took advantage of favorable market conditions with our $4 billion bond issuance in February at attractive prices, demonstrating strong investor confidence in our outlook. Our Q1 base dividend is up 3.5% year-on-year and will be paid on the 9th of June. That's an increase of 17% over the past 4 years. In addition to this base dividend growth, which is expected to be up $3 billion in full year 2026 versus 2025, we will also continue our $2 billion to $3 billion share buyback program for our employee share purchase plan, which was commenced in March. And our performance-linked dividend provides a clear mechanism to share upside with shareholders. Our Q1 adjusted net income was $33.6 billion, up 34% by $8.5 billion compared to last quarter and up 26% by $7 billion versus a year ago. This 26% increase year-on-year is despite realized prices being effectively the same and reflects the high performance and delivery from both the upstream and the downstream. Upstream adjusted EBIT was $54.2 billion, up $2.8 billion year-on-year, mainly from higher volumes. Quarter-on-quarter, adjusted upstream EBIT was $6.3 billion higher due to a 20% increase in realized prices, which reflected effectively 2 months of lower prices before the increases in March partially offset by lower volumes. Our Downstream delivered exceptional performance with adjusted EBIT of $5 billion, up by $3.6 billion or more than 3x year-on-year, reflecting higher refining margins, higher trading performance and also the effectiveness with which we were able to continue to deliver volumes to our customers. Quarter-on-quarter adjusted EBIT was up more than 60% and reflecting improved refining and chemical margins and strong trading results. Free cash flow was $18.6 billion, even after a $15.8 billion working capital build largely from higher prices. Importantly, the $34.4 billion free cash flow, excluding working capital movement, was up 62% year-on-year. Now before we move to Q&A, I want to leave you with a reminder of our unmatched free cash flow generation capability even as we invest around twice that of our nearest peer. More than 60% of our operating cash flow in 2025 was available for shareholder distributions and external investments. This is the highest cash availability of any of the IOCs and we do this while maintaining the lowest balance sheet gearing in the peer group. The current crisis further underscores the vital role of oil and gas and global economic activity and the importance of sustained investment in the sector to ensure reliable supply and stable inventories over time. Aramco is uniquely positioned with a robust reserve base of approximately 250 billion barrels of oil equivalent and a long-standing record of successfully maintaining and replacing reserves. As the reserves of our peers have declined, this level is now around 5x the total of those IOCs combined, up from 3.5x in 2018. While we have visibility on our reserves for decades into the future, we believe many other industry players will face significant calls on their cash to replace or acquire reserves and even these do not meet the needs for the industry as a whole. Again, this is the kind of long-term advantage and perspective, which Aramco offers its shareholders, which does not seem yet to be fully recognized by investors. With that, thank you for your attention. Amin, Peter and I are now pleased to take your questions.

[Operator Instructions]. I shall now hand back over to Mr. Hutton.

Thank you very much. And our first question comes from Iyad Ghulam of SMB.

Congratulations on the strong results in Q1. I have 2 questions. The first one is, how do you see the macro environment? And what would be the impact on the oil market in the short term and long term given the closure of the Strait of Hormuz? And the second question is what lessons has Saudi and Aramco learned from this crisis?

Thank you. Thank you, Iyad, for your questions. As you know, the disruptions phase and shipping by the Strait of Hormuz has both the biggest ever energy supply shock in history. Already, it has resulted in a loss, as I said, before almost a billion barrels of oil and has severely heard a number of critical industries such as agriculture, semiconductor mobility and as well as petrochemicals. The supply loss has been offset by Aramco's East-West Pipeline export and global strategic reserves and commercial inventory. They have helped to offset the net loss of around -- if the current disruptions continue at this rate, market will lose around 100 million barrels for every week, if the Strait of Hormuz trade performance remains closed. The loss will have to be covered by offshore inventories and the only buffer that is available today in the system. Let me add that the aggregate inventory levels globally are not a proper reflection of the current physical market tightness that we see -- you need to look into inventories by region, by product and what is realistically available without pushing the inventory system into operational distress. What we see from third-party estimates that shows that a fraction of these aggregate inventories to be effectively accessible. The rest is locked up in [ pipeline ] fills minimum tax levels and other day-to-day operational constraints. And the drawdown from onshore inventory is rapidly accelerating today, notably for refined products, including gasoline and jet fuel. And as you know, this may reach critically low level ahead of the summer driving and travel, this is an evident disconnect between futures and physical markets as evident in the strong refining margins that reflect the market tightness to [indiscernible]. The longer the supply disruptions continue, even for another few more weeks, it is going to take much longer time for oil market to rebalance and stabilize. It could drag on to 2027 to return normal level. And all it takes for that to happen is another shutdown, if you take it from the first of May, another 6 to 8 weeks, middle of June to drag it into 2027. And the supply disruption has led to demand rationing and a wide ratio forecasts are indicating demand growth this year at around 700,000 to 900,000 barrels a day. We anticipate demand rationing to continue as long as supply remains disrupted by the Strait of Hormuz. However, if and when normal trade and shipping resume, we anticipate a very robust return to demand growth significantly higher than the initial estimate for the growth in 2026. The urgency to ensure security of supply will lead to [ Rabbit ] restocking and rebuilding of strategic reserves and commercial inventories, a lot of drawdown on these inventories. They need to be resold by companies in the industries and by government. At the same time, the supply chain has been drastically affected. There used to be about 70 [indiscernible] a day moving through the Strait of Hormuz. We're down to 2 to 5 these days, but tankers are currently either presented from leaving the -- or entering the Strait of Hormuz. So the tankers today, if you look at them, they are stationed -- some of them outside Hormuz, if I look at the total tanker within the Hormuz, beside the area, you're looking at over 600 [indiscernible]. Majority are oil and products but some other commodities. Outside, it is also approximately 240 waiting outside. They cannot be waiting forever. We are almost 3 months now. Some of them patiently waiting for a long time, but concern some of them will start [ leading ] to other locations because they cannot stay idle for a long time. So they are missed up and some of them in their own places. And even in the most optimistic scenario, energy and commodity supply chains will need several months to return to the pre-conflict traffic and such a reroute or avoid being idled. Global oil supply challenges will continue at the strain intensified with each passing day. For your question with regard to the lesson learned from this conflict, one core lesson. It's clear for us that resilience cannot be built in the moment. It is engineered year in advance, beyond operational excellence through resilience demonstrated by the ability to absorb shocks, maintain continuity and execute with strength through disruptions and only validate under [indiscernible]. And we have demonstrated this, the East-West Pipeline which as I highlighted earlier, was conceived almost 5 decades ago, will maintain over the years, although not fully utilized. This investment paid off as we were able to increase the flow to 7 million barrels in just 8 days. Imagine you just change the whole thing and reroute all tankers and avail that much to the [ issue ] spot line in 8 days. Of course, we have learned a lot from the attack on [indiscernible] and in September 2019. When we maintain our ability to meet our customers' needs through swift execution of emergency response plans, and we were able to meet our requirement within 11 days by putting the full production backhaul. Another area where we have invested in that in the end is we have 2018, we built one of the biggest gas storage globally, which became very handy during this situation because when you have to shut down certain plants for whatever reason, attacks, incidents or with it, you can reproduce gas from these facilities. So it paid off also as an investment for us. We did that -- we did the engineering for that in 2018, it's on service right now. And building on the scale and quality of our infrastructure, our 70% local content of our 10-year active program and strategic inventory, almost 99% of [ items ] that we use for reiteration following the current attacks have been sourced through our local supply chain. It would have been delayed for months not years if the station elements that we needed were not available at handy within the [indiscernible] debt. Those who are not invested in the infrastructure -- and when I say about infrastructure, it is the design basis, how is the plan designed and what is the spacing between [indiscernible], what is the contingency and the flexibility within the existing plants between trains and [indiscernible] and pumps and compressors, all of this helped a lot in addition to our investment in people and systems to respond effectively without it. We had the risk of being seen as less reliable long -- to our long-term partner and this has a strategic and financial implication for us. Another lesson is the reminder of the central importance of stability in the oil and gas supplies and the need for sufficient inventory, by governments and as well by industries to minimize near-term disruptions. Beyond this, we believe that the industry needs to address declining reserves. And we'll have to divert cash to achieve this. Our 250 million barrels of reserves added to our resilience attraction, and we believe as well as value to Saudi Aramco.

Thank you, Iyad. If I move on to our next question, which comes from Michele Della Vigna at Goldman Sachs.

And really, congratulations on such strong results in a really challenging environment. There were 2 questions I wanted to ask. First, I wanted to come back to so that you clearly laid out of how this resilience has been built over a decade plus of planning and investment. And we see that the value of those results today. I was wondering, looking forward, what are the next steps that you want to take to continue to increase this resilience in years to come? Would this be a debottlenecking of the East-West Pipeline? Would this be about further increase in the storage of both oil and gas? I was just wondering if any of these potential investments are becoming increasingly attractive in the current environment? And then my second question, which comes back to your very strong downstream results, which come from the flexibility of our refining system is how much can you maximize just fuel exports at the time when some of the global markets, especially Europe, is heading towards extreme physical tightness by the middle and the end of the summer?

Thank you, Michele. You are right with regard to what we have done to increase our results. And as you know, we are a learning organization and are always looking for ways [indiscernible] to improve further. While we are currently in the middle of a crisis, our strategy team continued to develop our contingency plan for different scenarios to further strengthen our reliability and operational flexibility in different environments. We have subject matter experts in different organizations. All what they are doing today is what else that we can then more about and how can we increase our resilience in the mid-term, long term, considering what happened because this is a completely different crisis, the length of the crisis in terms of interruptions and combined with a number of attacks on facilities. So there is a lot of things that is currently going on in terms to increase this resilience. And we are [indiscernible] work, that gives us the flexibility to connect and in some cases, adopt our assets to capture these opportunities. And we had demonstrated this long-term strategic foresight and ability to adapt to these new solutions. A good example, as you highlighted, is it pipeline conceived almost 5 decades, maintained a good -- an excellent order where we had to bring it to a maximum capacity in 8 days only. So there is also the flexibility in the way we design and operate our oil and gas assets. Good example is what we have done in terms of gas storage. It was one of the biggest in the world gas storage facilities that we have built became very handy during the situation that we have in right now. So we are capitalizing also on AI and investment in AI to increase our resilience. And the big factor that clearly, as I highlighted earlier, local content. It has really allowed us 99%, say, of the material were sourced from -- within the Kingdom to do the fixes that we needed during this crisis. And our investment in [indiscernible] another terminal in there other than we have North and South terminals, Southern was put on stream in 2019. Our refining assets also and storage across Asia, Europe and in the Middle East really helped a lot in this situation. So we're talking about also your question with regard to refining, we are maximizing exports, especially [indiscernible] -- we are capitalizing on our refinery in the East to supply the local market. Our refinery in the Western region is handling some of the local markets that we just got a number of them are exporting. So looking at significant export of products from the existing refinery that we have in the Western region, that gives us a lot of -- we are capturing the margins as a result of the export facilities that we have in the Western region, and meeting the demand for the Kingdom security relying on the Eastern part of the Kingdom in terms of supplying the market here. But we are having into meeting our customer requirements in terms of different projects by maxing our refinery in the Western region. We have a good number wood of them in addition to some of them with partners, [indiscernible], there are so many refineries [indiscernible].

Thank you, Michele. The next question is from Martijn Rats, Morgan Stanley.

Let me just reiterate, Michele's point, that these are very impressive results on a very difficult conditions. So yes, future respect for that. I want to ask you 2 things. On the comments that it will take until later this year, if the closure lasts longer, it might take into 2027 before a full supply from the region is restored. Can I ask you to kind of talk to us about the sequencing of that. Exactly what are the things that are on the bottleneck? Is it tank versus it's [indiscernible]? Is it refinery repair? What makes it such an extended spirit? And in the sequencing, what are the things that we should be looking out for sort of items to watch? And then also, I just wanted to ask you, if we end up in a situation where the closure does last longer, are there things inside Aramco, operational things, where you would say, so far, we've been able to manage and if it lasts a bit longer, it's okay. But at some point, it sort of goes into another regime where a new set of problems emerge? Maybe not, but I just wanted to make sure I've sort of covered all my basis, so to say.

Thank you, Martijn. With regard to [indiscernible] about -- are our machine capacity is intact, and we -- and run it on a [indiscernible] by [indiscernible] and ending on the quarter in distant few weeks. So we have been able to ensure that our maximum sustained capacity is detect [indiscernible]. And however, repositioning these tankers right now, as I mentioned, is 240 waiting outside for products, audits and some for oil and there is almost [ 600 sites ]. But in locating these tankers and moving the right number of tankers inside, when everything goes back to normal, it's going to take time. Filling these tankers, ensuring the logistics are done. Don't forget, we are different than others. We kept our production on majority of our production is because of the East West pipeline. Others, they have to shut down plants completely. When you shut down the plant completely, you run the risk of putting it back on [indiscernible] times, when you look at facility specialty pipeline, after 2 months, you need to monthly assets, [indiscernible] if you don't put it on. So putting these facilities back on and with that, you will definitely end up with some technical progress to ensure that you reach that capacity, it's going to take some time. You're talking about certain if we open today, certain countries might need 3 to 6 months. They announced that to put their facility back at capacity. As we get into longer period of time, it's going to take more because this facility would have been shut down for a much longer time than land. And with that, they would need, as I say, we look at these facilities, they need to look at mothballing. The biggest issue is the tanker fleet, as I said, that tanker fleet is restocked, [indiscernible] I would say is the wrong place. They need to reassemble [indiscernible], if Strait of Hormuz shortly and you need to bring them back, not to mention when I talk about take a long time. Global inventories were -- we are [indiscernible]. We're at the bottom end of the 5-year average before the crisis. Right now, with a lot of the drawdown, this, I would say, a lot of fees they need to restock, not only governments but as well as industries because in every refinery, every assets around the world, you can asset inventory. Once likely they [indiscernible] -- now they need to be stuck on this inventory. So it's going to take time to meet the requirements and fill in the inventories that we started this crisis with a very low inventories globally. And now we are running the risk with every week as [indiscernible] million barrels, that goes down. When you had about 400 million barrels that came out released from Europe and the U.S., maximum you can pull out from there is 2 million barrels a day, not like you can supply this much. But later on with 100 million barrels every week, we are already short of, as I mentioned, 800 million, 900 million barrels an ounce. And every week from May 1, another 100 million barrels, and until this crisis is over. So these inventories will be deleted in the next need companies, and they need to tap into their spare capacity, which may exist here within the region. Unfortunately, spare capacity doesn't exist somewhere else. All the space capacity this interruption also interrupted the spare capacity that existed within the region. So that will take some time before we start. That's why the delay lining up the tankers, making sure they go to the right terminals, you start selling in these tankers and they start their journey. When we started the whole crisis in March, the impact was not much because a lot of the tankers that required were reading that were on their way to the market. We start seeing the problem much bigger in April. And you will start seeing it much more than May and June because you are having into all these commercial inventories and [ SBR ] more and more with time.

The second question of Martijn was are there any issues for Aramco, which over time, might become more [indiscernible] we can do it for a certain period of time?

No, I think we are capitalizing on our flexibility. The East-West Pipeline, we're looking at additional contingency that will give us more flexibility within our system. But so far, we are making sure that the reliability of our system and ensuring that we have spare equipment are available and the contingency is ensuring also that we continue to for the future, counting on might take longer than expected.

Next question is from Kim Fustier at HSBC.

I wanted to ask about a couple of upstream fields that I believe were impacted by attacks in April, it was [indiscernible]. [indiscernible] was restored within days. But could you concern the status on [indiscernible], how much of the 300,000 barrels a day capacity has been restored. And what's the time line on that? And then I also wanted to ask you about the small dip in your refining supply relies already in the first quarter. Is this to do with physical disruptions to your refineries and thinking about [ Rastonura ], [indiscernible] or just with lower refinery utilization because you've prioritized crude exports? And what should we expect in terms of refining supply reliability in the second quarter given that SATORP is only partly operational?

Thank you, Kim. With regard to our oil [indiscernible], our [indiscernible] is readily available as based on the Ministry report, [indiscernible] attack, but they are back on operation. We can meet our maximum sustained capacity are -- so we are going back on our oil capacity as a result of these facts, we are able to restore these facilities in a few days. With regard to refining, refining some of our refinery were attacked as also highlighted by the Ministry report that we are restoring, somewhere restored, some were partially restored and they are in the process of fully restoring these facilities. And of course, utilization is impacted if your refinery asset is in the Gulf region. [indiscernible] difficult if you meet the Kingdom requirement, you cannot export, see some of them are designed for export markets. And if you are located within the Gulf region, you might have difficulty to utilization, it will be slightly impacted. But we are maxing up our Western region refinery assets, ensuring that we meet our requirement. We don't have any -- so for example, if you look at our -- all of our assets are fully operational and the address for the operational [indiscernible] joint venture in [indiscernible], it's partially only 3. And we are working to fully bringing it back but it is on stream, but not at full capacity right now. [indiscernible] reginery, which was also attack brought back with some units right now going into T&I, but that we can -- as soon as we finish the [ C&I ] should be ready available.

Thank you, Kim. And the next question is from Henri Patricot at UBS.

Two questions from my side. The first one, coming back to a comment you made, I mean, earlier that you're looking at more contingent. I was wondering just it should be into this disruption, whether you've identified ways to perhaps dip further your pipeline capacity, your export capacity in a relatively short period of time without meaningful investments, whether there's something like this that might be possible in the near term? And then secondly, again, following up on the downstream, you mentioned exceptional quarter, $5 billion of EBIT and refining margins still look very strong in the second quarter, to what extent that exceptional performance is replicable in the second quarter even stronger than that than the first quarter.

Thank you, Henri. With regard to your first question, we are taking certain measures to increase our flexibility and reliability beyond what we have right now, but I'm not going to mention the details of what we are doing right now. But as I said, [indiscernible], we are a learning organization. And this attack took place, there was a lot of learning, but it's also additional things at least to improve further. We are taking these measures to make to strengthen our resilience. We have proven through [indiscernible] now through these attacks that we have a good system, and we always have contingency and flexibility within our system disappointed as with pipeline with all the [indiscernible] and maintain that brought into full capacity within a short time very day. So we are looking at extrameas to strengthen our resilience. But at the details, which at a number of times. Yes, I don't want to be defining anything to add? Yes. Andre. On the second question, Q1 saw an increase in refining and downstream margins, both refining which increased by 14%. Chemicals increased by 7%. Our facilities were mostly operational. We're able to after this margin, we expect because of the tightness that Amin talked about earlier in the markets, that tightness is basically in refined products as well. So we expect margins to continue to be elevated to continue to generate very good downstream results in Q2 as well.

Next question Lydia Rainforth, Barclays. Go ahead, Lydia.

Firstly, thank you for keeping everything going in the way that you have in terms of supply in the market. And then I have 2 questions, if I could. The first one, can we just touch on pricing? Obviously, the [ SPs ] have risen as we've gone in through May and June. You talked about refineries of the having quite good margins. At what point do you expect the balance to shift back from it's a crude that gets the benefit of the pricing versus so the refined product side? And then secondly, just to switch tack completely. You talked about sort of the long-term planning side. Can you -- and terms of the AI side, I know there's now you've done a lot of work on. Can you just talk us through any progress that you've made since our last time together?

I didn't get the second question. But on the first question, we're seeing -- because of refining margins were high, as I mean mentioned, we're seeing the most of the pricing power is actually in the product. So that is why we are prioritizing our refineries and exporting products over -- and then whatever is remaining goes to crude. As long as that continues, this will be our strategy. But of course, our strategy is flexible enough to switch very quickly to prioritizing crude exports. I didn't get the second question. I think -- okay. Lydia, your second question about AI?

It was, yes. So just the progress that you're making there because of the -- I say it's easy to focus on all kind of stuff is the long term then clearly does make a difference as well.

Yes. We have through AI, we have successfully captured almost $11 billion through realized value since the in the year, almost $5.3 billion in 2025. This is the total realized value. Our AI solutions is helping us a lot in monitoring, for example, so it's not only what we realize is the value. But in the current circumstances, a lot of our surveyance but exactly happening in different brands pipeline networks operation, and it's captured through AI, 1 million data points a day. It tells us a lot to understand it is there's a lot of flexibility here our operational -- the way we operate and the way we respond to different defense is currently happening. We are able also through capturing -- we're using AI to an assessment because we have -- we needed to do a lot of assessment following these attacks in [ drones ] and using our cameras or sensors that are existing in different plants and through our system. All of these data is this a lot to respond effectively, and we have seen the results where most of the facility, we have either brought back on quickly as possible or they are in the process to be brought in on stream right now. So AI is a major enabler that give us a lot of solutions to deliver on our commitments, meet our performance KPIs -- and with regard to what [indiscernible] mentioned about fruit or products, we are maximizing product at this stage because of the higher margins. It depends on the situation and how long it will take. That might be the case until the performance is open. And then will all the vents and what happened after the [indiscernible] but we think we will be seeing a huge significant demand when the street pops up as a result of not only demand growth as a result of filling the inventories, the commercials and the governments as we are.

We've still got a few questions, we've got 6 to go. So the next question is from Matt Lofting at JPMorgan. Go ahead, Matt.

Congratulations on the operational resilience the company continues to demonstrate. As Saudi Aramco has ramped up, deployment of the East-West pipeline very impressively. Could you just talk about how stable the logistical processes on the Kingdom's West Coast, including [ ]Yanbu approved? And I just wonder whether you're seeing any limitations or potential pinch points emerging to any of those outlets in terms of being able to consistently export those volumes as the Hormuz closure persists?

Thank you, Matt. The East-West Pipeline on bumping -- bump station associated with the terminals in North or South were fully operational before at a reduced level, of course, before the event that took place -- we had to ramp up, as I said, in 8 days to go to capacity. And with that, the only issue that we have seen is aligning up it. As I said, also the best way at the wrong place, they were either entering homes or waiting to load from our [indiscernible]. The reason is also our crude what goes to Asia. That's why -- and mainly what we use from the West region is what goes through to euro. Our domestic refinery is in the Western area. So do a lot of relocation of all of these sets to relocate to our North and South terminals and [indiscernible] took a lot of efforts because customers -- in the beginning, in the first they thought things will be opening up. They'd rather [ weak ] at the interest to almost because they thought the situation will ease up a day or 2. There was an extra cost for them to go through cumber, longer distance, they just wanted to wait a little bit. But then reality hits when they found out this is going to be take longer than expected. And as a result, we were able to sign up all the tankers to load from our facility in the north and south of import. So took a lot of effort in arrangement and marketing to work with the customers to ensure they can meet their commitment.

Thanks, Matt. Moving on to the next question, which is Sashank at Bank of America.

Congratulations on a strong set of results. I just have one question with regards to your storage, both in Saudi and outside. Just wondering how the trend of your storage has been in the month of April and especially in Saudi, given I'm assuming you've been able to produce again a bit more with some of the assets that you mentioned, which were impacted back and operating. And again, in line with that, how does inventory or storage look outside of Saudi in some of your locations?

Thank you, Sashank. We don't disclose storage volumes that any are externally more commercial. We have significant, I would say, storage domestically including extensive network across our asset can farms and also underground story. Nationally, we have been able to tap into our global storage hubs enhance deliveries to our customers from locations in Asia and Europe and [ Rotterdam], Middle East. So our assets that entire our storage facilities in Japan and Korea, where -- were very handy in the current events, and we were able to tap into these assets. They provide us with additional flexibility and provided, of course, especially the international one that the disruption is not further extended.

Okay. Sashank. Next question is from the Eva Xenios from BNP Paribas.

Again, congratulations on the results. So firstly, I was wondering if you had any more comments about demand destruction, specifically for petrochemicals in Asia. Or is it a short-term demand rationing in your view? And so you talk about once the Strait of Hormuz reopens, it will take a few months to do market rebalance. Are you able to comment if this estimate logistics are on the minds made a administrate also caused one of the 2 ships [ already reported an to the straight year scheme that will be already can find elements ] ....

Sorry, Eva. I'm afraid we missed that second question. Could you repeat the second question?

Yes, of course. So second question was, you talk about once the Strait of Hormuz opens, it will take a few months for the oil market to rebalance. Are you able to comment if there's estimate isn't just logistics, but also time taken to clear in mind for the state and other security assurances?

Yes. Thank you, Eva. No, I'm just talking about logistics. It will take months. Now [indiscernible]. So we need to be time to clear this [ mine ]. But I'm assuming they will do it simultaneously. They will start cleaning the mine before any bankers can access. But logistically, you need to put your assets back on, you start a shutdown plan for certain countries in the region where they had to shut down some of their plants. They need to put them on. So there is a lot of work. But it is months what I talked about has nothing to do with how much time it will take to you need to add how much time it will take to clear the mines to whatever times we talked about. With regard to -- I would call it I wouldn't call it destruction, I would call it demand rationing, we don't see any demand destruction or curtailment of consumption. In fact, what we are seeing is that unmet demand as a result of the supply in the [indiscernible], with supply loss estimated to be between, as I said, almost [ 1 billion ] barrels. As you said, in response to the supply disruption by Strait of Hormuz, some petrochemical companies reduced utilization in certain Asian markets, we noticed that. End users are growing from inventories. And as long as shipping and trade remains disruptive, that one effect will continue to be felt across the petrochemical product market. And several of and petrochemical companies have tapped into their inventories. -- reduced production, while a number of them have declared force majeure due to supply constraints. There have been arbitrage volume from the west to the east, but that might not be sufficient to meet all of the demand from Asia. Over the Asia, I would say, petrochemical sector plays a major role on in various critical industries be automotive, agriculture, packaging, construction, just to name a few. So it depends on this sizes will limit our petrochemical industry, especially in the region, which is significant to supply the market.

Thank you, Eva. We have 2 questions to go. The first of those is from [indiscernible].

Hello, everyone. First of all, congrats on the strong and resilient results. My first question is on actual production level. Can you shed some light about the production level? Was it higher than March or not? And also the effective capacity of [ Jumbo ] terminal during the month of [indiscernible]?

Thank you, [indiscernible]. We don't really report on a month by month. We worked on a quarter by quarter. And you can see overall, liquid production had increased to 11.1% in the fourth quarter, and we had to reduce by around 0.5 million barrels in this first quarter this -- but with regard to younger terminal, the terminal has around 5 million potential for exports that we are the [indiscernible], and we are in the process of increasing that. We're looking at ways to increase that beyond the 5 million barrels of export capacity within the [indiscernible].

Thank you, [indiscernible], good questions. And the last question for this afternoon direct today is from Bertrand Hodee, Kepler Cheuvreux.

Yes. Congratulations on the strong result, stand resilience of Aramco operation. You explained that now refineries in the East are supplying the domestic markets. And -- but can you give a bit more details on the product side, so volumes and type of products you are able to export via the Red Sea currently?

Yes, Bertrand, as I said, the East, we are capitalizing on our refineries to meet local demand in areas where it's not required, for example, a refinery not really losing a project that we cannot export because of the closure of the data formats to reduce utilization of that refinery because we don't have access export these products in the part -- the [indiscernible] side of the Kingdom, we are maximizing, as I mentioned, our [indiscernible] of these assets and we have a significant amount of projects that we are -- you can say we are a net exporter of [indiscernible] project from the Western region, almost [ 900,000 ] of pre-mine projects are exported, western region. We are capitalizing and marking out the capacity of our [indiscernible] refinery and putting that in the export market. not using, of course, each reminder had its own export terminal. By the way, when we talk about [ 5 million ] barrels, and we are looking at increasing that beyond the 5 billion barrels right now, that's for crude of products, we do have existing export terminals for projects. So we are not really clouding our crude export capacity.

I think that brings us to the end of the Q&A session of the call. Thank you very much for everybody to join us. Thank you again to Amin and Ziad in the busy schedule for answering everybody's questions. If there's any further questions that people have, that's what Investor Relations are for. So never hesitate, please give us a ring. The next scheduled event is, of course, our second quarter results, which will be published on the 4th of August, so many times in the intervening period. Thank you very much indeed.