Integrated oil and gas company TOTAL S.A. (TOT) reported first-quarter 2012 operating earnings of $1.78 per share (EUR1.36 per share), flat with the Zacks Consensus Estimate. Operating earnings declined 6% from $1.89 (EUR1.38 per share) reported in the year-ago period.
Total Revenue
Total revenue at the end of first-quarter 2012 was $67.07 billion (EUR51.17 billion) against $62.97 billion (EUR46.02 billion) in the first quarter of 2011. The year-over-year growth in revenue was 7% (up 11.0% in euros).
The company benefited from the higher realized prices of its products despite a flattish production year over year.
TOTAL has restructured its Downstream and Chemical segments into Refining Chemical and Supply Marketing. The company has started to report under these new segments in the current quarter under review.
Production and Realized Price
Total hydrocarbon production during the first quarter 2012 averaged 2,372 thousand barrels of oil equivalent (kboe) per day, flat with the year-ago production. During the quarter the company began production from Usan in Nigeria, Bongkot South in Thailand and Islay in UK North Sea, while production was disrupted in Syria due to security reasons.
Liquids production during the quarter averaged 1,229 thousand barrels (MBbls) per day, down 5% year over year. Besides CIS and African operations, all other regions registered a decline in production, resulting in the year-over-year downfall.
Gas production during the quarter was 6,226 thousand cubic feet (Mcf) per day, up 6% year over year.
Total refinery throughput for the first quarter of 2012 was 1,830 MBbls per day versus 2,012 MBbls per day in the first quarter of 2011. The yearly decline was mainly due to the sale of interest in CEPSA.
The realized price for Brent in the first quarter of 2012 was $118.60 per barrel, up 13% from $105.40 per barrel in the first quarter of 2011. The average realized liquid price in the reported quarter increased by 16% year over year to $115.20 per barrel from $99.50 per barrel in first quarter 2011.
Realized gas prices for the reported quarter increased 16% year over year to $7.16 per Mbtu from $6.19 Mbtu in the first quarter of 2011. Realized hydrocarbon prices increased to $82.10 per barrel of oil equivalents (boe) from $71.70 in the first quarter of 2011.
Financial Update
Cash and cash equivalents of TOTAL as of March 31, 2012, were $17.78 billion (EUR13.33 billion) versus $23.1 billion (EUR17.32 billion) as of March 31, 2011.
The net debt-to-equity ratio was 22.2% on March 31, 2012 versus 19.3% on March 31, 2011.
TOTAL’s cash flow from operation in the first quarter 2012 was $6.7 billion, down by 1% from the comparable period of the previous year.
Sale and Purchase of Assets
During first quarter 2012, TOTAL made acquisitions worth $2.4 billion (EUR1.83 billion). The company primarily expanded its reach in Africa, gaining an exploration & production license in Uganda, exploration permits in Angola and minority interests in Fina Antwerp Olefins.
In the reported quarter, TOTAL disposed of assets worth $1.9 billion (EUR1.45 billion), comprising the sale of Sanfoli shares, Upstream assets in France, interest in Gassled pipeline in Norway and its interest in Composites Ones in the U.S. and Pec-Rhin in France.
TOTAL’s net investment in the first quarter of 2012 was $5.5 billion (EUR4.25 billion), down 19% from $6.86 billion (EUR5.02 billion) in the first quarter of 2011.
2Q12 Preview
TOTAL started production in three new prospects in the first quarter of 2012, which will definitely benefit the company. However, the company expects production in the second quarter to be negatively impacted by the accident in Elgin complex in the UK North Sea. Besides, scheduled seasonal maintenance will also lower the production during the quarter.
At the Peer
BP Plc (BP), which competes with TOTAL SA, is going to report its first-quarter 2012 earnings on May 1, 2012.
The Zacks Consensus expectation for the first quarter is $1.67 per share.
Our View
TOTAL continued with its aggressive drilling strategy and also acquired assets globally leveraging its strong financial position. Besides, the company has entered into an agreement to develop an integrated refining-petrochemical project in China.
We appreciate the decision of the company to pay a regular as well as an interim dividend to its shareholders in 2012.
However, the gas leak at TOTAL’s Elgin complex in the UK North Sea raises doubt about the safety of its operations. We believe the gas leak and the consequent efforts to stop the leakage will impact results in the second quarter. The company needs to be more cautious to avert such incidents, especially after the Deepwater Horizon accident in the Gulf of Mexico which was an eye opener for everyone in the oil industry.
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. TOTAL S.A. currently retains a Zacks #3 Rank (short-term Hold rating).
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