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TOTAL (TOT) Lags Q2 Earnings Estimates, Keeps 2017 View

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Integrated oil and gas company, TOTAL S.A. (TOT - Free Report) reported second-quarter 2017 operating earnings of 97 cents per share (€0.88 per share), lagging the Zacks Consensus Estimate of 98 cents by a penny.

Second-quarter operating earnings improved 8% from the year-ago figure of 90 cents per share (€0.79 per share). The year-over-year improvement in earnings was due to good operational performance, steadily decreasing breakeven production costs and a gradual improvement in the realized prices of commodities.

Total Revenue

Total revenue in the reported quarter came in at $39.91 billion, up 7.3% from $37.21 billion in the year-ago quarter.

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Production

Total hydrocarbon production during second-quarter 2017 averaged 2,500 thousand barrels of oil equivalent (kboe) per day, up 3.0% year over year. The increase was due to higher contribution from Kashagan, Moho Nord, Incahuasi, Surmont and Angola LNG, partially offset by natural field decline. Improved security condition in Libya also boosted production.

In the second quarter, liquids production averaged 1,298 thousand barrels per day, increasing 4% from the year-ago period.

Gas production during the quarter was 6,500 thousand cubic feet per day, up 1% year over year. Soft performance in Asia Pacific, Europe & Central Asia, was more than neutralized by an increase in production in Africa and the Americas.

Realized Price

In second-quarter 2017, the realized price for Brent was up 9% to $49.60 per barrel from $45.60 in the year-ago quarter. The average realized liquid price improved 5% to $45.1 per barrel from the year-ago level of $43.0.

Realized gas prices in second-quarter 2017 improved 15% year over year to $3.93 per one thousand Btu (Mbtu).

Realized hydrocarbon prices gained 6% to $35.5 per barrels of oil equivalent (boe) from $33.0 in second-quarter 2016.

Highlights of the Release

Operating income in the reported quarter was $2,748 million, up 9% 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 $2,474 million, up 14% from the year-ago quarter.

During the quarter, TOTAL announced production growth in excess of 3% primarily due to new startups.

Segment Details

Exploration & Production’s operating income was $1,359 million, compared with $1,043 million in second-quarter 2016. The year-over-year increase was due to production growth, cost reductions and an increase in the average realized hydrocarbon price.

Gas, Renewable & Power’s operating income was $95 million, compared with $43 million in second-quarter 2016. The year-over-year increase was primarily due to better contribution from the gas activities.

Refining & Chemicals operating income was $861 million, compared with $1,018 million in second-quarter 2016.

Marketing & Services operating income was $433 million, compared with $420 million in second-quarter 2016. The year-over-year increase was due to strong marketing margins.

Sale & Purchase of Assets

In second-quarter 2017, TOTAL acquired assets worth $103 million, primarily comprising the PitPoint B.V. (natural gas vehicle fuel provider) and an additional interest in the Baudroie-Mérou license in Gabon.

The company sold assets worth $207 million during the same period, including the completion of the sale of Société du Pipeline Méditerranée Rhône (SPMR).

Financial Update

Cash and cash equivalents as of Jun 30, 2017 were $28.72 billion, compared with $22.65 billion as of Jun 30, 2016.

Net debt-to-equity ratio was 20.3% at the end of second-quarter 2017, down from 30.0% at the end of second-quarter 2016.

2017 Guidance

TOTAL expects production from the upstream segment to improve 4% year over year.

The company continues to work on cost management initiatives and targets cost savings of $3.5 billion in 2017.

Our View

TOTAL missed second-quarter 2017, Zacks Consensus Estimate by a penny, but continues to benefit from new startups and acquisition, which is helping it to boost production. The company remains committed toward cost savings initiatives. After savings of $2.8 billion in 2016, TOTAL aims to save $3.5 billion in costs this year.

Going forward, the company will continue to benefit from upstream startups and cost management initiatives. Strategic acquisitions and asset divestures will further strengthen the portfolio.

TOTAL currently 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

Exxon Mobil Corp. (XOM - Free Report) is scheduled to release second-quarter 2017 earnings on Jul 28. The Zacks Consensus Estimate for the quarter is 83 cents, down 8.8% in the last 30 days.

BP plc (BP - Free Report) is scheduled to release second-quarter 2017 earnings on Aug 1. The Zacks Consensus Estimate for the quarter is 39 cents, down 20.4% in the last 30 days.

Eni S.p.A (E - Free Report) is scheduled to release second-quarter 2017 earnings on Jul 28. The Zacks Consensus Estimate for the quarter is pegged at 9 cents.

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