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TOTAL (TOT) Q2 Earnings Lag, Revenues Up on High Production

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TOTAL S.A. (TOT - Free Report) reported second-quarter 2018 operating earnings of $1.31 per share (€1.10 per share), lagging the Zacks Consensus Estimate of $1.50 by 12.7%.

The bottom line improved 35.1% from the year-ago figure of 97 cents (€0.88 per share). This upswing is due to solid operational performance, improvement in commodity prices and new project ramp ups, boosting production.

TOTAL S.A. Price, Consensus and EPS Surprise


TOTAL S.A. Price, Consensus and EPS Surprise | TOTAL S.A. Quote

Total Revenues

Total revenues came in at $52.54 billion, up 31.6% from $41.18 billion generated in the year-ago quarter.

Production Touched New High

Total hydrocarbon production during the second quarter averaged 2,717 thousand barrels of oil equivalent per day, up 9% year over year. The increase was due to higher contribution from Kashagan, Moho Nord, Fort Hills, Edradour-Glenlivet, Libra, Timimoun and Yamal LNG, partially offset by natural field decline, PSC price effect, and heavy seasonal maintenance.

In the reported quarter, liquids production averaged 1,582 thousand barrels per day, increasing 22% from the year-ago period.

Gas production during the quarter was 6,176 thousand cubic feet per day, down 5% 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 second quarter, realized price for Brent was up 50% to $74.4 per barrel from $49.6 in the year-ago quarter. Average realized liquid price improved 54% to $69.5 per barrel from the year-ago level of $45.1.

Realized gas prices in the quarter improved 14% from the prior-year quarter to $4.49 per thousand Btu.

Realized hydrocarbon prices increased 53% to $54.3 per barrel of oil equivalent, up from $35.5 in second-quarter 2017.

Highlights of the Release

Operating income was $4,179 million, up 52% from the year-ago period. Higher contribution from Exploration & Production, and Gas, Renewable & Power segments boosted operating income.

Adjusted net income in the reported quarter was $3,553 million, up 44% from the year-ago quarter.

Interest expenses in the reported quarter were $478 million compared with $345 million in the year-ago period.
Segment Details

Exploration & Production’s operating income was $2,687 million compared with $1,359 million in second-quarter 2017. The year-over-year increase was due to production growth, cost reduction and an increase in average realized hydrocarbon price.

Gas, Renewable & Power’s operating income was $193 million compared with $95 million in second-quarter 2017.

Refining & Chemicals’ operating income was $821 million compared with $861 million in the year-ago quarter.

Marketing & Services’ operating income was $278 million compared with $433 million in second-quarter 2017. Volume growth helped the company take full advantage of consistently good margins, primarily in Africa.

Sale & Purchase of Assets

In the first half of 2018, TOTAL acquired assets worth $4,114 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, the acquisition of 16.3% interest in Waha field in Libya and offshore assets from Cobalt in the Gulf of Mexico.

In the first half of 2018, the company sold assets worth $2,862 million, comprising mainly the sale of Martin Linge field in Norway, an interest in the Fort Hills project in Canada, a stake in marketing activities in Italy and SunPower’s sale of its interest in 8point3.

Financial Update

Cash and cash equivalents as of Jun 30, 2018 were $26.47 billion compared with $28.72 billion on Jun 30, 2017. Net debt-to-equity ratio was 19.8% at the end of the quarter, down from 20.0% at the end of second-quarter 2017.

2018 Guidance

TOTAL’s upstream production is expected to increase 7% in 2018, up 100 basis points from the earlier expectation, driven by higher contribution from the new assets.

The company continues to undertake 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 within $16-$17 billion in 2018.

Our View

TOTAL’s earnings in the reported quarter lagged the Zacks Consensus Estimate but increased from the year-ago quarter, courtesy of improvement in commodity prices, cost control and new upstream projects.

The company has been gaining and will continue to benefit from upstream startups, as well as cost-management initiatives. Strategic acquisitions strengthen its portfolio and help to expand operation.

In addition, the company is utilizing its strong cash-flow generating capacity to strengthen balance sheet, pay dividend and buy back shares.

Currently, TOTAL carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming  Releases

PetroChina Company Limited (PTR - Free Report) is expected to release second-quarter earnings on Aug 23, 2018. The Zacks Consensus Estimate is pegged at $3.97.

YPF Sociedad Anonima  (YPF - Free Report) is anticipated to report second-quarter earnings on Aug 14, 2018. The Zacks Consensus Estimate stands at 52 cents.

BP Plc. (BP - Free Report) is expected to announce second-quarter earnings on Jul 31, 2018. The Zacks Consensus Estimate is pegged at 85 cents.

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