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TOTAL S.A. Misses Q2 Earnings Estimates as Production Slides

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Integrated oil and gas company TOTAL S.A. (TOT - Free Report) reported second-quarter 2014 operating earnings of $1.38 per share (€1.00 per share), lagging the Zacks Consensus Estimate of $1.42 by 2.8%. Earnings were 12% lower than the year-ago figure of $1.57 per share (€1.21 per share).

The year-over-year decline in contribution from Refining & Chemicals and Marketing & Services segments impacted the company’s earnings.

Total Revenue

Total revenue was $62.56 billion, up 2% from $61.34 billion in the year-ago quarter.


Total hydrocarbon production averaged 2,054 thousand barrels of oil equivalent (kboe) per day, decreasing 10% from the year-ago quarter. The decline was primarily attributable to portfolio changes and security issues in Libya, normal production decline and a high level of planned maintenance which totally offset the benefits derived from startups.

In the reported quarter, liquids production averaged 934 thousand barrels (MBbls) per day, down 10% from the prior-year quarter. Liquid production got a beating in the Middle East, Africa and South America, which pulled down the overall output.

Gas production was 5,867 thousand cubic feet (Mcf) per day, down 5% year over year. Weak production from Europe, Africa, Middle-East and South America more than offset the increase in gas production in North America, Asia-Pacific and CIS regions.

Realized Price

In second-quarter 2014, the realized price for Brent increased 47% to $109.7 per barrel from $102.4 per barrel in the prior-year quarter. The average realized liquid price increased 7% to $103.0 per barrel from $96.6 per barrel in second-quarter 2013.

Realized gas prices dropped 2% year over year to $6.52 per Mbtu. Realized hydrocarbon prices in second-quarter 2014 increased to $73.1 per barrel of oil equivalents (boe) from $69.8 per boe in second-quarter 2013.

Financial Update

Cash and cash equivalents as of Jun 30, 2014, were $22.17 billion versus $15.12 billion as of Jun 30, 2013.

The net debt-to-equity ratio was 27.1% at the end of second-quarter 2014 versus 27.6% at the end of second-quarter 2013.

TOTAL’s cash flow from operation in second-quarter 2014 was $48.05 billion, up 74% from $27.64 billion in second-quarter 2014.

Sale and Purchase of Assets

TOTAL acquired assets worth $1.4 billion during the first half of 2014. The investments were made to acquire interest in Elk and Antelope discoveries in Papua New Guinea and the acquisition of additional Novatek shares.

TOTAL disposed assets worth $1.67 billion in the first half of the year which comprised the sale of the Angola block 15/06 and a partial IPO interest in Gaztransport & Technigaz.

TOTAL’s net investment in first half 2014 was $12 billion, down 2.4% from $12.3 billion in the first half of 2013.

Other Company Releases

Statoil ASA reported second quarter earnings of 50 cents per share, 10.7% lower than the Zacks Consensus Estimate of 56 cents.

BP plc (BP - Free Report) reported second quarter earnings of $1.18, beating the Zacks Consensus Estimate of $1.15 by 2.6%.

Our View

TOTAL’s performance in the reported quarter was impacted by a decline in production, offset marginally by higher realized prices of the products sold. The ongoing geopolitical tension in the Middle-East and Africa adversely impacted the production of TOTAL.

TOTAL continues to streamline its asset base through systematic acquisitions and the sale of assets. The company is on course to meet its target of $15 billion to $20 billion in asset sale over 2012 to 2014.

TOTAL has several upstream and downstream projects scheduled for startup in the upcoming quarters, which will likely boost performance going forward.

TOTAL currently holds a Zacks Rank #3 (Hold). Another industry heavyweight ExxonMobil Corp. (XOM - Free Report) is slated to release its second quarter earnings on Jul 31, 2014. The Zacks Consensus Estimate is pegged at $1.91 per share.

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