Luberef (Saudi Aramco Base Oil Company) - Q1 2026 Earnings Analysis

Performance Highlights

Luberef reported Q1 2026 revenue of SAR 2.158 billion, up from SAR 2.128 billion in Q1 2025, with net income rising 16% year-on-year to SAR 258 million against the prior period's SAR 222 million, beating expectations on the strength of byproduct performance. Earnings per share reached SAR 1.53, EBITDA grew 17% to SAR 337 million, and ROACE held at 23% despite a 14% compression in base oil crack margins to SAR 1,513/MT and a 12% decline in base oil sales volumes to 240,000 MT.

The single most important driver was the sharp improvement in byproduct crack margins, particularly diesel, which contributed approximately $70/MT and more than offset weaker base oil spreads caused by a geopolitical-driven feedstock cost spike. Contracts of affreightment with Singapore Shipping Company, Uni-Tankers, and Bahri delivered SAR 21 million in freight savings, while GCC market expansion into Qatar, Bahrain, and Kuwait added new commercial footholds.

Management Outlook and Forward Catalysts

Management revised full-year base oil sales guidance down to 1.15 million MT from 1.25 million MT, attributing the reduction entirely to Q1 stabilisation delays following the company's largest-ever turnaround, with no further volume losses anticipated. A planned 30-day Yanbu shutdown in H2 2026 to complete the Growth II project, now 71% complete with SAR 153 million capex deployed in Q1, remains the central execution milestone for the year.

Bulls will focus on the expected Q2 base oil crack margin recovery as April posted prices confirm a lag-driven rebound, alongside Growth II commissioning optionality and tightening Group I supply globally. Bears will watch whether geopolitical disruption persists beyond Q2, compressing both base oil spreads and free cash flow, which already fell 86% year-on-year to SAR 41 million on higher capex and working capital build.