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French major Total SA reported fourth quarter earnings before the open Thursday announcing record production and guiding production higher for the fourth time this year. All $TOT divisions are performing better than expected.

Oil Gas Sunset

Total Fina SA. (NYSE: $TOT) Reported Before Open Thursday

$1.17 EPS on $46.30 billion in revenue 

Earnings

Total SA (TOT) reported fourth-quarter net income of $1.13 billion, up from $1.02 billion a year earlier. Total's adjusted net profit rose to $3.16 billion from $2.87 billion, the company said. Analysts had forecast adjusted net profit of $3.04 billion, according to FactSet. Total revenues came in at $46.3 billion, up 11.8% from $41.4 billion generated in the year-ago quarter. 

Segment Details

  • Exploration & Production’s operating income $2,476 million compared with $1,805 million in fourth-quarter 2017. The year-over-year increase was due to production growth and an increase in average realized hydrocarbon price.
  • Gas, Renewable & Power’s operating income $176 million compared with $232 million in fourth-quarter 2017.
  • Refining & Chemicals’ operating income  $900 million compared with $886 million in the year-ago quarter.
  • Marketing & Services’ operating income was $333 million compared with $436 million in fourth-quarter 2017.

TOTAL acquired assets worth $8,314 million, primarily comprising the acquisition of interests in deep-water offshore fields in Lara and Lapa in Brazil, two new 40-year concessions in offshore Abu Dhabi, offshore assets from Cobalt in the Gulf of Mexico and Engie’s LNG business, Direct Energie.

During the year, the company sold assets worth $5,172 million, primarily comprising the sale of Martin Linge field in Norway, an interest in the Fort Hills project in Canada, a stake in marketing activities in Italy, SunPower’s sale of its interest in 8point3, Joslyn in Canada and Rabi in Gabon.

 Total SA (ADR) NYSE: TOT

Market Reaction Pre-market 54.70 −0.92 (-1.65%)

Highlights

"These excellent results reflect the strong growth of more than 8% for the group's hydrocarbon production," Chief Executive Patrick Pouyanne said.

  • In Q4 liquids production averaged 1,589 thousand barrels per day, increasing 14% from the year-ago period.
  • Gas production during the quarter was 6,994 thousand cubic feet per day, up 2% year over year.
  • In the fourth quarter, realized price for Brent was up 44% to $68.8 per barrel from $61.3 in the year-ago period.
  • Average realized liquid price decreased 1% to $57.2 per barrel from the year-ago level of $57.6.
  • Realized gas prices improved 17% from the prior-year quarter to $4.94 per thousand Btu.
  • Realized hydrocarbon prices increased 8% to $46.9 per barrel of oil equivalent from $43.3 in fourth-quarter 2017.
  • Total said production is expected to rise by 9% to reach over 3 million barrels of oil equivalent per day in 2019.
  • Output reached an all-time high of 2.8 million barrels of oil equivalent per day in 2018 thanks to the start-up of various operations and increased production in liquefied natural gas (LNG) and deep sea projects in Australia, Angola, Nigeria, Russia and Brazil.

Total also announced a major, new discovery off the coast of South Africa that could contain around 1 billion barrels of total resources of gas condensate and light oil.

TOT proposed an annual dividend of 66 European cents ($0.75), up from 62 cents a share last year, and said it will cancel the option for a scrip dividend from June.

In 2019 Total said it is targeting $4.7 billion in cost reductions and plans to invest between $15 billion and $16 billion.

“Between production growth and spending discipline, we have a clear visibility of the growth of our cash flow in 2019. At $60 per barrel, we will be better than at $71 per barrel in 2018,” Pouyanne said.

Total said the results would enable it to continue its shareholder returns policy announced last year. After increasing dividends by 3.2% in 2018, it planned a 3.1% rise in 2019. It will also buy back $1.5 billion of its shares in 2019 after buying back the same amount last year, but this could increase if oil prices rose, Pouyanne said.  

Total Fina SA Q3 Earnings Recap

$1.47 EPS on $48.40 billion in revenue 

Earnings

Total SA (TOT) reported third-quarter net income of $3.96 billion compared to $2.72 billion the previous year. Earnings per share were $1.47 compared to $1.06. Adjusted net income increased by 48% to $4.0 billion. Adjusted net income per share was $1.47, an increase of 42% year-over-year. Third-quarter revenue from sales were $48.40 billion compared to $37.08 billion, a year ago. 

 Total SA (ADR) NYSE: TOT

Market Reaction > $57.84 Weekly Close

Highlights

      • Contribution from E&P increased by 85%, fueled in part by production growth of 8% and by accretive barrels.
      • Debt-adjusted cash flow, or DACF, increased by 25% to $20 billion.
      • Organic CapEx was $8 billion.
      • So based on our sensitivity of $2.8 billion per year for $10 per barrel change in Brent, our post-dividend cash flow breakeven is less than $50 per barrel.
      • Looking at the third quarter results compared to the second quarter. Brent was flat quarter-to-quarter. But we increased adjusted net income by more than 11% to $4 billion or $1.47 per share, the highest level we have seen since 2012.
      • DACF increased by 10% to $7.5 billion, also a multi-year high.
      • Production continued to grow, up by more than 3% quarter-over-quarter to a new record high of 2.8 million barrels per day in the third quarter.
      • In the month of September, we reached 2.9 million barrels per day.
      • The 2018 interim dividend has been increased by 3.2%, in line with the 10% increase of the full year.
      • We have bought back all of the scrip shares issued this year. And on top of buying back the scrip share, we bought back $1 billion of stock through the end of September as part of the $5 billion buyback announced in February. And we will buy back $1.5 billion this year.

We also announced that the strategic priority is maintaining a strong balance sheet with gearing below 20%, and we are delivering here as well. Gearing was 18.3% at the end of the third quarter despite cash outlay of $3.6 billion for the net acquisition in the quarter, comprised mainly of Direct Energie and Engie LNG, plus a bridge in working capital that was partially due to integrating this acquisition into our accounts as well as high crude oil price at the end of September.

What Analysts Will Be Watching

Divestments and production are key focuses for Total as with all the majors. $TOT is preparing to sell up to $1.5 billion in assets in Britain's North Sea, including one-third of its stake in the Laggan-Tormore gas fields. The divestment will include stakes in several smaller fields that Total acquired when it took over A.P. Moller-Maersk's oil-and-gas business in 2017.

Updates on renewable energy are important for the French company. Petróleo Brasileiro S.A. or Petrobras announced last month they have joined with Total S.A. to assess the opportunities related to renewable energy sources in Brazil. The companies, through a memorandum of understanding (MoU), decided to analyze the solar and onshore wind energy segments in the country.

Total SA explores, develops, produces and markets oil and gas. It is also engaged in trading and shipping of crude oil and petroleum products. The company operates through the following business segments: Upstream, Refining & Chemicals and Marketing & Services.

The Upstream segment includes the activities of exploration & production and gas. The Refining & Chemicals segment encompasses refining, petrochemicals and specialty chemicals operations. This segment also includes the activities of trading & shipping. The Marketing & Services segment includes worldwide supply and marketing activities in the oil products and services field as well as the activity of New Energies. The company was founded on March 28, 1924 and is headquartered in Courbevoie, France.

Sources: TradersCommunity, Total

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