Integrated oil and gas company TOTAL S.A. (TOT) reported its first-quarter 2011 operating earnings of $1.89 per share (€1.38 per share), ahead of the Zacks Consensus Estimate of $1.84 per share. The operating earnings of the company reflected a growth of 33.1% from $1.42 per share (€1.02 per share) reported in the year-ago period.
Total Revenue
Total revenue at the end of first-quarter 2011 was $62.97 billion (€46.03 billion) as against $52 billion (€37.60 billion) in the first quarter of 2010. The year-over-year growth in revenue was 21.1% (up 22.4% in euros).
Production and Realized Price
Total hydrocarbon production during the first quarter 2011 averaged 2,371 thousand barrels of oil equivalent (kboe) per day, down 2.3% year over year. Production in the quarter was afflicted by a change in the portfolio and disruptions in Libya.
Liquids and gas production during the quarter averaged 1,293 thousand barrels (MBbls) per day, down 6% year over year and 5,880 thousand cubic feet (Mcf) per day, up 1% year over year, respectively.
The realized price for Brent was $106.4 per barrel for the first quarter of 2011, compared with $76.4 per barrel in the year-ago period, reflecting a growth of 38%. The average realized liquid price shot up by 34% year over year to $99.5 per barrel during the first quarter of 2011. Realized gas prices during the first quarter jumped 22% year over year to $6.19 per Mbtu.
Realized hydrocarbon prices in the first quarter 2011 increased $16.2 per barrel of oil equivalents (boe) to $71.7 boe.
Segmental Update
Net income during first quarter 2011 increased by 34% year over year to $4.24 billion from $3.17 billion reported in the year-ago quarter. The strong results were driven by solid performance across all of the oil major’s operating businesses.
Upstream net income during the quarter was $3.9 billion, up 43% from $2.73 billion reported in first quarter 2010, mainly owing to higher hydrocarbon prices.
Downstream net income during the quarter rose 77% to $0.4 billion from $0.2 billion reported in first quarter 2010. The year-over-year growth came from the higher utilization rate in Europe, which offset the negative impact of lower refining margins.
Chemical net income during the quarter was $0.3 billion reflecting a growth of 50% from $0.2 billion reported in first quarter 2010. The year-over-year growth resulted from an overall improvement in the petrochemical environment and higher contribution from its international operations in Qatar and South Korea.
Financial Update
TOTAL’s cash and cash equivalents as of March 31, 2011, were €17.33 billion versus €12.95 billion as of March 31, 2010.
The net debt-to-equity ratio improved to 19.3% as of March 31, 2011 from 21.5% as of March 31, 2010.
TOTAL’s cash flow from operation at the end of first quarter 2011 was $7.8 billion (€5.71 billion) versus $7.2 billion (€5.26 billion) at the end of the prior-year period. The growth was mainly due to increase in net income offset to some extent by unfavorable changes in working capital compared to the prior-year quarter.
Sale and Purchase of Assets
The company continues to prudently acquire and dispose of assets to make its asset base more tuned to its long-term business strategy. In first quarter 20111, net investments of the company, excluding asset sales, were $6.86 billion (€5.02 billion) versus $3.68 billion (€2.66 billion) in the first quarter of 2010.
During first quarter 2011, TOTAL made acquisitions worth $3.46 billion, up from $1.68 billion in first quarter 2010. The investments were made to acquire assets in the Fort Hills and Voyageur projects in Canada and also include the 7.5% additional interest in the GLNG projects in Australia.
In tandem the company disposed of assets worth $0.4 billion in the reported quarter, down however from $1.33 billion in the prior-year quarter. The sale during the quarter comprised mainly of the shedding of Sanofi-Aventis shares.
2011 Preview
For the second quarter 2011, the Upstream segment is expected to see a positive impact from the acquisition of interest in the Russian company Novatek. The company continues to develop its project in Angola, which is expected to accrue benefits from the final quarter of 2011.
The Downstream segment is expected to benefit in the second quarter of 2011 from the start-up of the new deep conversion unit at the Port Arthur refinery in the US.
The company is committed to the cause of continuous research and development and has fixed a billion dollar budget for this purpose in 2011.
At the Peer
BP Plc (BP), which competes with TOTAL SA, reported first-quarter 2011 earnings of $1.69 per American Depositary Share (ADS), well below the Zacks Consensus Estimate of $1.80. The quarterly result was lower than the year-earlier earnings of $1.78 per share. The year-over-year decline in earnings was attributable to weaker production, increased spill-associated costs and a lower contribution from gas marketing and trading.
Our Take
The company reported strong results in the first quarter 2011, surprising our expectation. We appreciate the approach of the company to gradually expand its operations worldwide through acquisitions and partnerships.
During the reported quarter the company expanded its operations in Russia by acquiring a 12.08% interest in Novatek and agreeing to acquire another 20% stake in the Yamal LNG project. The company also acquired assets in Uganda, U.K., Argentina and Australia, true to its worldwide expansion policy.
The company’s commitment to develop renewable energy is equally laudable. TOTAL entered into a broad strategic relationship with SunPower Corporation (SPWRA) to further develop the solar power industry. TOTAL will also provide SunPower with up to $1 billion of credit support over the next five years for solar research and development.
TOTAL S.A. currently retains a Zacks #1 Rank (short-term 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.
BP PLC (BP): Free Stock Analysis Report
SUNPOWER CORP-A (SPWRA): Free Stock Analysis Report
TOTAL FINA SA (TOT): Free Stock Analysis Report
Zacks Investment Research
