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TOTAL (TOT) Q1 Earnings Miss, Production at Record High
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TOTAL S.A. reported first-quarter 2018 operating earnings of $1.09 per share (€0.89 per share), lagging the Zacks Consensus Estimate of $1.12 by 2.7%.
The bottom line improved 8% from the year-ago figure of $1.01 (€0.95 per share). This was due to solid operational performance, steadily decreasing manufacturing costs and new project ramp ups, boosting production.
Total Revenues
Total revenues came in at $49.61 billion, up 20.5% from $41.18 billion generated in the year-ago quarter.
Total hydrocarbon production during the first quarter averaged 2,703 thousand barrels of oil equivalent per day, up 5% year over year. The increase was due to higher contribution from Kashagan, Moho Nord, Fort Hills, Edradour-Glenlivet and Yamal LNG, partially offset by natural field decline and PSC price effect. Improved security condition in Libya and Nigeria also boosted production.
In the reported quarter, liquids production averaged 1,481 thousand barrels per day, increasing 14% from the year-ago period.
Gas production during the quarter was 6,664 thousand cubic feet per day, down 3% year over year. Increased production in Africa, Europe and Central Asia could not offset the soft production from the Asia-Pacific region.
Realized Price
In the first quarter, the realized price for Brent was up 24% to $66.8 per barrel from $53.7 in the year-ago quarter. Average realized liquid price improved 23% to $60.3 per barrel from the year-ago level of $49.2.
Realized gas prices in the quarter improved 15% year over year to $4.73 per thousand Btu.
Realized hydrocarbon prices increased 25% to $47.3 per barrels of oil equivalent (boe), up from $37.9 in first-quarter 2017.
Highlights of the Release
Operating income was $3,385 million, up 22% from the year-ago period. Higher contribution from Exploration & Production and Gas, Renewable & Power segments boosted the operating income.
Adjusted net income in the reported quarter was $2,884 million, up 13% from the year-ago quarter.
Cost-reduction initiatives have resulted in cost savings of $3.7 billion in 2017 and the company aims to save more than $4 billion in 2018.
Segment Details
Exploration & Production’s operating income was $2,183 million, compared with $1,382 million in first-quarter 2017. The year-over-year increase was due to production growth, cost reduction and an increase in the average realized hydrocarbon price.
Gas, Renewable & Power’s operating income was $115 million compared with $61 million in first-quarter 2017.
Refining & Chemicals’ operating income was $720 million compared with $1,023 million in the year-ago quarter.
Marketing & Services’ operating income was $367 million compared with $301 million in first-quarter 2017. Volume growth helped the company to take full advantage of consistently good margins.
Sale & Purchase of Assets
In the reported quarter, TOTAL acquired assets worth $3,688 million, primarily comprising the acquisition of interest in deep-water offshore fields in Lara and Lapa in Brazil, two new 40-year concessions in offshore Abu Dhabi, and the acquisition of 16.3% interest in Waha field in Libya.
The company sold assets worth $2,169 million during the same period, comprising mainly the sale of Martin Linge field in Norway, an interest in the Fort Hills project in Canada and a stake in marketing activities in Italy.
Financial Update
Cash and cash equivalents as of Mar 31, 2018 were $30.09 billion, compared with $27.52 billion as of Mar 31, 2017. Net debt-to-equity ratio was 15.1% at the end of the quarter, down from 18.1% at the end of first-quarter 2017.
2018 Guidance
TOTAL’s upstream production is expected to increase 6% in 2018, in sync with its objective to grow 5% per year on an average between 2016 and 2020.
The company continues to work on its cost-management initiatives and expects to generate cost savings of more than $4 billion in 2018. Organic and acquisitions net of asset sales are expected to be $15-$17 billion in 2018.
Our View
TOTAL’s earnings in the reported quarter were lower than the Zacks Consensus Estimate but better than the year-ago quarter, thanks to its strong operational performance, cost control and new upstream projects. The company also benefited from the recovery of commodity prices.
The company will benefit further from upstream startups and cost management initiatives. It continues to gain from strategic acquisitions and asset divestures, which will further strengthen its portfolio.
The company is utilizing its strong cash-flow generating capacity to strengthen its balance sheet, pay dividend and buy back shares.
ExxonMobil Corporation (XOM - Free Report) is expected to release first-quarter earnings on Apr 27, 2018. The Zacks Consensus Estimate for the quarter is pegged at $1.18.
Chevron Corp. (CVX - Free Report) is expected to release first-quarter earnings on Apr 27, 2018.The Zacks Consensus Estimate for the quarter is pegged at 67 cents.
BP Plc. (BP - Free Report) is expected to release first-quarter earnings on May 1, 2018.The Zacks Consensus Estimate for the quarter is pegged at $1.45.
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TOTAL (TOT) Q1 Earnings Miss, Production at Record High
TOTAL S.A. reported first-quarter 2018 operating earnings of $1.09 per share (€0.89 per share), lagging the Zacks Consensus Estimate of $1.12 by 2.7%.
The bottom line improved 8% from the year-ago figure of $1.01 (€0.95 per share). This was due to solid operational performance, steadily decreasing manufacturing costs and new project ramp ups, boosting production.
Total Revenues
Total revenues came in at $49.61 billion, up 20.5% from $41.18 billion generated in the year-ago quarter.
TOTAL S.A. Price, Consensus and EPS Surprise
TOTAL S.A. Price, Consensus and EPS Surprise | TOTAL S.A. Quote
Record Production
Total hydrocarbon production during the first quarter averaged 2,703 thousand barrels of oil equivalent per day, up 5% year over year. The increase was due to higher contribution from Kashagan, Moho Nord, Fort Hills, Edradour-Glenlivet and Yamal LNG, partially offset by natural field decline and PSC price effect. Improved security condition in Libya and Nigeria also boosted production.
In the reported quarter, liquids production averaged 1,481 thousand barrels per day, increasing 14% from the year-ago period.
Gas production during the quarter was 6,664 thousand cubic feet per day, down 3% year over year. Increased production in Africa, Europe and Central Asia could not offset the soft production from the Asia-Pacific region.
Realized Price
In the first quarter, the realized price for Brent was up 24% to $66.8 per barrel from $53.7 in the year-ago quarter. Average realized liquid price improved 23% to $60.3 per barrel from the year-ago level of $49.2.
Realized gas prices in the quarter improved 15% year over year to $4.73 per thousand Btu.
Realized hydrocarbon prices increased 25% to $47.3 per barrels of oil equivalent (boe), up from $37.9 in first-quarter 2017.
Highlights of the Release
Operating income was $3,385 million, up 22% from the year-ago period. Higher contribution from Exploration & Production and Gas, Renewable & Power segments boosted the operating income.
Adjusted net income in the reported quarter was $2,884 million, up 13% from the year-ago quarter.
Cost-reduction initiatives have resulted in cost savings of $3.7 billion in 2017 and the company aims to save more than $4 billion in 2018.
Segment Details
Exploration & Production’s operating income was $2,183 million, compared with $1,382 million in first-quarter 2017. The year-over-year increase was due to production growth, cost reduction and an increase in the average realized hydrocarbon price.
Gas, Renewable & Power’s operating income was $115 million compared with $61 million in first-quarter 2017.
Refining & Chemicals’ operating income was $720 million compared with $1,023 million in the year-ago quarter.
Marketing & Services’ operating income was $367 million compared with $301 million in first-quarter 2017. Volume growth helped the company to take full advantage of consistently good margins.
Sale & Purchase of Assets
In the reported quarter, TOTAL acquired assets worth $3,688 million, primarily comprising the acquisition of interest in deep-water offshore fields in Lara and Lapa in Brazil, two new 40-year concessions in offshore Abu Dhabi, and the acquisition of 16.3% interest in Waha field in Libya.
The company sold assets worth $2,169 million during the same period, comprising mainly the sale of Martin Linge field in Norway, an interest in the Fort Hills project in Canada and a stake in marketing activities in Italy.
Financial Update
Cash and cash equivalents as of Mar 31, 2018 were $30.09 billion, compared with $27.52 billion as of Mar 31, 2017. Net debt-to-equity ratio was 15.1% at the end of the quarter, down from 18.1% at the end of first-quarter 2017.
2018 Guidance
TOTAL’s upstream production is expected to increase 6% in 2018, in sync with its objective to grow 5% per year on an average between 2016 and 2020.
The company continues to work on its cost-management initiatives and expects to generate cost savings of more than $4 billion in 2018. Organic and acquisitions net of asset sales are expected to be $15-$17 billion in 2018.
Our View
TOTAL’s earnings in the reported quarter were lower than the Zacks Consensus Estimate but better than the year-ago quarter, thanks to its strong operational performance, cost control and new upstream projects. The company also benefited from the recovery of commodity prices.
The company will benefit further from upstream startups and cost management initiatives. It continues to gain from strategic acquisitions and asset divestures, which will further strengthen its portfolio.
The company is utilizing its strong cash-flow generating capacity to strengthen its balance sheet, pay dividend and buy back shares.
TOTAL carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Peer Releases
ExxonMobil Corporation (XOM - Free Report) is expected to release first-quarter earnings on Apr 27, 2018. The Zacks Consensus Estimate for the quarter is pegged at $1.18.
Chevron Corp. (CVX - Free Report) is expected to release first-quarter earnings on Apr 27, 2018.The Zacks Consensus Estimate for the quarter is pegged at 67 cents.
BP Plc. (BP - Free Report) is expected to release first-quarter earnings on May 1, 2018.The Zacks Consensus Estimate for the quarter is pegged at $1.45.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more.
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