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Mark Vickery

Earnings Beat at TOTAL, Sales Dip

BP TOT

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Integrated oil and gas company, TOTAL S.A. (TOT - Analyst Report) reported third-quarter 2012 operating earnings of $1.85 per share (€1.48 per share), surpassing the Zacks Consensus Estimate of $1.78 per share. Operating earnings increased 5% from $1.75 (€1.24 per share) reported in the year-ago period.

Total Revenue

Total revenue at the end of third-quarter 2012 was $62.37 billion (€49.89 billion) as against $65.21 billion (€46.16 billion) in the third quarter of 2011. The year-over-year dip in revenue was 4% (up 8.0% in euros).

Production and Realized Price

Total hydrocarbon production during the third quarter 2012 averaged 2,272 thousand barrels of oil equivalent (kboe) per day, decreasing 2% from the year-ago production. During the quarter the company registered growth in liquids products, but the reduction in gas production lowered the overall production level of the company. 

Liquids production during the quarter averaged 1,225 thousand barrels (MBbls) per day, up 4% year over year. The upsurge in production came mainly from contribution from new projects. 

Gas production during the quarter was 5,680 thousand cubic feet (Mcf) per day, down 9% year over year from 6,228 Mcf/d. Gas production was impacted by the incidents in UK and Nigeria besides normal decline and scheduled maintenance outages.
 
Total refinery throughput for the third quarter of 2012 was 1,790 thousand barrels (MBbls) per day versus 1,922 MBbls per day in the third quarter of 2011.

The realized price for Brent in the third quarter of 2012 was $109.5 per barrel, down 3.4% from $113.4 per barrel in the third quarter of 2011. The average realized liquid price in the reported quarter increased by 0.8% year over year to $107.60 per barrel from $106.80 per barrel in third quarter 2011.

Realized gas prices for the reported quarter decreased 8.5% year over year to $6.00 per thousand British thermal unit (Mbtu) from $6.56 Mbtu in the third quarter of 2011. Realized hydrocarbon prices increased by 50 cents per barrel of oil equivalents (boe) to $75.80 per boe from $75.30 in the third quarter of 2011.

Financial Update

Cash and cash equivalents of TOTAL as of September 30, 2012, were $21.63 billion (€16.83 billion) versus $25.64 billion (€19.94 billion) as of September 30, 2011.

The net debt-to-equity ratio was 20.8% on September 30, 2012 versus 15.2% on September 30, 2011.

TOTAL’s cash flow from operation in the third quarter 2012 was $6.4 billion (€5.1 billion), decreasing by 23% (13.0% in euros) from the comparable period of the previous year.

Sale and Purchase of Assets

During the quarter, TOTAL made acquisitions worth $0.4 billion (€0.3 billion). The company acquired exploration licenses in Iraq, specialty chemicals in Brazil, and gained approval to carry out the Utica shale gas and condensates project in the US.

In the third quarter, TOTAL disposed of assets worth $1.75 billion (€1.4 billion), comprising mainly the sale of Sanfoli shares and upstream assets in UK and Nigeria.
 
TOTAL’s net investment in the third quarter of 2012 was $4.7 billion (€3.8 billion), up from -$1.6 billion (-€1.2 billion) in the third quarter of 2011.

The company is on course to meet its target of asset sale between $15 billion and $20 billion for the 2012 to 2014 period.

At the Peer

BP Plc. (BP - Analyst Report), which competes with TOTAL SA, reported third quarter 2012 earnings of $1.48 per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items, comfortably surpassing our expectation of $1.29, mainly attributable to increase in oil and gas output. However, the quarterly figure decreased 11.4% from the year-earlier adjusted profit level of $1.67.

BP’s total revenue decreased 4.7% year over year to $93.1 billion in the quarter. The decrease was mainly due to lower oil and U.S. gas prices.

Our View

TOTAL continued with its aggressive drilling strategy and also acquired assets globally, leveraging its strong financial position. We appreciate TOTAL’s decision to increase its stake in the Ichthys LNG project in Australia.

Besides, stepped-up drilling and exploration projects worldwide has allowed the company to come up with new findings in French Guiana and Azerbaijan. In the final quarter of the year the company has plans to explore new opportunities in the Gulf of Mexico, Iraq, Ivory Coast, Kenya and Gabon.

TOTAL S.A. currently retains a short-term Zacks #1 Rank (Strong Buy rating).

France-based TOTAL is one of the largest publicly traded, globally integrated oil and gas companies based on production volumes, proved reserves and market capitalization. The company has exploration and production operations across five continents. With a market capitalization of $113.65 billion, the company has 96,104 full time employees.

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