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TOTAL (TOT) Beats Q2 Earnings & Revenues on Oil Recovery
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Integrated oil and gas company TOTAL S.A.TOT reported second-quarter 2016 operating earnings of 90 cents per share (€0.79 per share), easily surpassing the Zacks Consensus Estimate of 75 cents by 20%.
Operating earnings, however, plunged 32.8% from $1.34 per share (€1.21 per share) a year ago.
The company’s strict cost discipline and addition of low-cost assets have brought down the breakeven point. In addition, the recovery in oil prices in the second quarter boosted its earnings on a sequential basis. Earnings were up 32.3% sequentially, thanks to the rise in oil prices.
Total Revenues
Total revenues in the reported quarter were $37.21 billion, down 17% from $44.71 billion in the year-ago quarter. However, revenues surpassed the Zacks Consensus Estimate of $35.3 billion by 5.4%.
Production
Total hydrocarbon production during the second quarter of 2016 averaged 2,424 thousand barrels of oil equivalent (kboe) per day, up 5% year over year. The increase was primarily driven by new project startups, partially offset by the security situation in Nigeria and forest fires in Canada.
In the second quarter, liquids production averaged 1,253 thousand barrels per day, up 3% from the prior-year quarter. Higher liquid production from Europe and Central Asia lifted the overall output, though it was partially offset by lower production in America and the Asia-Pacific region.
Gas production during the quarter was 6,466 thousand cubic feet per day, up 9% year over year. Soft performance from the Middle East, North Africa and America was more than offset by an increase in Asia-Pacific, Europe and Central Asia.
In second-quarter 2016, the realized price for Brent was down 26% to $45.60 per barrel from $61.90 per barrel in the year-ago quarter. The average realized liquid price also dropped 26% to $43.0 per barrel from $58.2 per barrel in the year-ago quarter.
However, due to the recovery in oil prices post February, the realized Brent price and the average liquid prices improved 34.5% and 38.7% sequentially, respectively.
Realized gas prices in second-quarter 2016 decreased 27% year over year to $3.43 per Mbtu.
Realized hydrocarbon prices in the second quarter declined 27% to $33.0 per barrel of oil equivalent (boe) from $45.4 per boe in second-quarter 2015.
The rebound in oil prices helped TOTAL to drive up adjusted net income by 33% sequentially to $2.2 billion.
Sale and Purchase of Assets
In the second quarter, TOTAL acquired assets worth $206 million, primarily comprising the purchase of shares in Saft, while it sold assets worth $472 million, comprising mainly its retail network in Turkey.
Financial Update
Cash and cash equivalents as of Jun 30, 2016, were $22.65 billion compared with $27.32 billion as of Jun 30, 2015.
The net debt-to-equity ratio was 30.2% at the end of second-quarter 2016, up from 25.9% at the end of second-quarter 2015.
2016 Guidance
TOTAL expects production from its Upstream segment startups to benefit its overall 2016 performance. TOTAL’s production is expected to increase 4% in 2016, after reaching 4.5% growth in the first half.
The startup of Upstream projects – Incahuasi in Bolivia and Kashagan in Kazakhstan – in the second half will drive production.
TOTAL continues to work on cost management initiatives and targets to invest in the range of $18–$19 billion in 2016.
Peer Releases
BP plc (BP - Free Report) reported second-quarter earnings of 23 cents, while the Zacks Consensus Estimate was 26 cents.
Royal Dutch Shell reported second-quarter earnings of 26 cents, while the Zacks Consensus Estimate was 53 cents.
Upcoming Release
PetroChina Co. Ltd. is expected to report second-quarter 2016 earnings on Aug 25, 2016. The Zacks Consensus Estimate for the quarter is 3 cents.
Our View
TOTAL was able to surpass estimates, thanks to its rigorous cost management efforts and the rise in oil price during the second quarter from historical lows. TOTAL has successfully lowered operating expenses, as per its plans, and is on track to exceed its cost saving target of $2.4 billion for 2016.
Thanks to startups, TOTAL also boosted its upstream output by 5% year over year in the reported quarter.
Total’s long-term objective is to double its liquefaction capacity to around 20 million tons per year and increase its LNG trading portfolio to 15 million tons per year by 2020. During the first seven months of 2016, the company signed three contracts with its Asian customers, which will boost its LNG trading portfolio by nearly 2 million tons per year. It’s almost certain that TOTAL is on course to meet its trading objective.
TOTAL currently has a Zacks Rank #3 (Hold).
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TOTAL (TOT) Beats Q2 Earnings & Revenues on Oil Recovery
Integrated oil and gas company TOTAL S.A. TOT reported second-quarter 2016 operating earnings of 90 cents per share (€0.79 per share), easily surpassing the Zacks Consensus Estimate of 75 cents by 20%.
Operating earnings, however, plunged 32.8% from $1.34 per share (€1.21 per share) a year ago.
The company’s strict cost discipline and addition of low-cost assets have brought down the breakeven point. In addition, the recovery in oil prices in the second quarter boosted its earnings on a sequential basis. Earnings were up 32.3% sequentially, thanks to the rise in oil prices.
Total Revenues
Total revenues in the reported quarter were $37.21 billion, down 17% from $44.71 billion in the year-ago quarter. However, revenues surpassed the Zacks Consensus Estimate of $35.3 billion by 5.4%.
Production
Total hydrocarbon production during the second quarter of 2016 averaged 2,424 thousand barrels of oil equivalent (kboe) per day, up 5% year over year. The increase was primarily driven by new project startups, partially offset by the security situation in Nigeria and forest fires in Canada.
In the second quarter, liquids production averaged 1,253 thousand barrels per day, up 3% from the prior-year quarter. Higher liquid production from Europe and Central Asia lifted the overall output, though it was partially offset by lower production in America and the Asia-Pacific region.
Gas production during the quarter was 6,466 thousand cubic feet per day, up 9% year over year. Soft performance from the Middle East, North Africa and America was more than offset by an increase in Asia-Pacific, Europe and Central Asia.
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Realized Price
In second-quarter 2016, the realized price for Brent was down 26% to $45.60 per barrel from $61.90 per barrel in the year-ago quarter. The average realized liquid price also dropped 26% to $43.0 per barrel from $58.2 per barrel in the year-ago quarter.
However, due to the recovery in oil prices post February, the realized Brent price and the average liquid prices improved 34.5% and 38.7% sequentially, respectively.
Realized gas prices in second-quarter 2016 decreased 27% year over year to $3.43 per Mbtu.
Realized hydrocarbon prices in the second quarter declined 27% to $33.0 per barrel of oil equivalent (boe) from $45.4 per boe in second-quarter 2015.
The rebound in oil prices helped TOTAL to drive up adjusted net income by 33% sequentially to $2.2 billion.
Sale and Purchase of Assets
In the second quarter, TOTAL acquired assets worth $206 million, primarily comprising the purchase of shares in Saft, while it sold assets worth $472 million, comprising mainly its retail network in Turkey.
Financial Update
Cash and cash equivalents as of Jun 30, 2016, were $22.65 billion compared with $27.32 billion as of Jun 30, 2015.
The net debt-to-equity ratio was 30.2% at the end of second-quarter 2016, up from 25.9% at the end of second-quarter 2015.
2016 Guidance
TOTAL expects production from its Upstream segment startups to benefit its overall 2016 performance. TOTAL’s production is expected to increase 4% in 2016, after reaching 4.5% growth in the first half.
The startup of Upstream projects – Incahuasi in Bolivia and Kashagan in Kazakhstan – in the second half will drive production.
TOTAL continues to work on cost management initiatives and targets to invest in the range of $18–$19 billion in 2016.
Peer Releases
BP plc (BP - Free Report) reported second-quarter earnings of 23 cents, while the Zacks Consensus Estimate was 26 cents.
Royal Dutch Shell reported second-quarter earnings of 26 cents, while the Zacks Consensus Estimate was 53 cents.
Upcoming Release
PetroChina Co. Ltd. is expected to report second-quarter 2016 earnings on Aug 25, 2016. The Zacks Consensus Estimate for the quarter is 3 cents.
Our View
TOTAL was able to surpass estimates, thanks to its rigorous cost management efforts and the rise in oil price during the second quarter from historical lows. TOTAL has successfully lowered operating expenses, as per its plans, and is on track to exceed its cost saving target of $2.4 billion for 2016.
Thanks to startups, TOTAL also boosted its upstream output by 5% year over year in the reported quarter.
Total’s long-term objective is to double its liquefaction capacity to around 20 million tons per year and increase its LNG trading portfolio to 15 million tons per year by 2020. During the first seven months of 2016, the company signed three contracts with its Asian customers, which will boost its LNG trading portfolio by nearly 2 million tons per year. It’s almost certain that TOTAL is on course to meet its trading objective.
TOTAL currently has a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? ? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>