Integrated oil and gas company TOTAL S.A. (TOT) reported its fourth-quarter 2010 operating earnings of $1.54 per share (€1.14 per share) versus the Zacks Consensus Estimate of $1.58 per share. The operating earnings of the company reflected a growth of 12.4% from $1.37 (€0.93 per share) reported in the year-ago period.
TOTAL’s 2010 operating earnings were $6.08 per share (€4.58 per share) compared with $4.85 per share (€3.48 per share) reported in 2009. The results of the company failed to meet the Zacks Consensus Estimate of $6.43 per share as provided by 3 covering analysts.
Total Revenue
Total revenue at the end of fourth-quarter 2010 was $54.54 billion (€40.16 billion) against $53.54 billion (€36.23 billion) in the fourth quarter of 2009. The year-over-year growth in revenue was 2% (up 11.0% in euros).
TOTAL reported full year 2010 revenue of $211.14 billion (€159.27 billion) versus $183.17 billion (€131.32 billion) in 2009. The revenue over the prior year grew at a brisk 15% clip (up 21.0% in euros).
Production and Realized Price
Total hydrocarbon production during the fourth quarter 2010 averaged 2,387 thousand barrels of oil equivalent (kboe) per day, up 04.3% from the year-ago quarter.
Total hydrocarbon production during 2010 averaged 2,378 kboe per day, up 4.3% from 2009 levels. The annual growth was due to higher production from new projects, lower OPEC (Organization of the Petroleum Exporting Countries) reductions and improvement in gas demand, with fewer disruptions in Nigeria.
Liquids and gas production during the quarter averaged 1,337 thousand barrels (MBbls) per day, down 5% year over year and 5,692 thousand cubic feet (Mcf) per day, up 7% year over year, respectively. In 2010, liquids and gas production averaged 1,340 MBbls per day, down 3% year over year and 5,648 thousand cubic feet (Mcf) per day, up 15% year over year, respectively.
Total refinery throughput for 2010 was 2,009 MBbls per day versus 2,151 MBbls per day in 2009. The yearly decline was mainly due to shutdowns at the Dunkirk refinery and at a distillation unit in the Normandy refinery. Strikes in France also cast a negative impact.
The realized price for Brent was $86.5 per barrel for the fourth quarter of 2010, compared with $74.5 per barrel in the year-ago period, reflecting a growth of 16%, while 2010 realized price for Brent was $79.5 per barrel versus $61.7 per barrel in 2009, reflecting a growth of 29%.
The average realized liquid price increased by 19% year over year to $83.7 per barrel during the fourth quarter and 31% year over year to $76.3 per barrel for the fiscal 2010.
Realized gas prices during the fourth quarter increased 11% year over year to $5.62 per Mbtu while the prices in 2010 remained unchanged from 2009 levels.
Realized hydrocarbon prices in the fourth quarter 2010 increased $7.5 per barrel of oil equivalents (boe) to $61.9 boe, while for 2010 the prices increased to $56.7 boe from $47.1 boe in 2009.
Financial Update
Cash and cash equivalents of TOTAL as of December 31, 2010, were €14.48 billion versus €11.66 billion at 2009 end.
The net debt-to-equity ratio was 22.2% at the end of 2010 versus 26.6% at the end of 2009.
TOTAL’s cash flow from operation at the end of 2010 of €18.49 billion grew significantly over 2009 levels mainly due to the increase in net income and a favorable change in working capital.
Net investments of the company, excluding acquisitions, and including net investments in equity affiliates and non-consolidated companies, were $15.8 billion (€11.9 billion) versus $17.1 billion (€12.3 billion) in 2009.
Sale and Purchase of Assets
During 2010, TOTAL made acquisitions worth €3.5 billion. The investments were made to acquire assets in the Barnett Shale in the United States, UTS in Canada, a 20% interest in the GLNG projects in Australia and additional interest in Laggan Tormore blocks in the United Kingdom.
In 2010, TOTAL disposed of assets worth €3.5 billion, comprising the sale of Hod and Valhall fields, sale of Sanofi-Aventis shares, 5% interest in Block 31 in Angola and the Mapa Spontex unit in the Chemicals segment.
Total will continue to make strategic acquisition and divest non-core assets from its portfolio in 2011.
2011 Preview
TOTAL has plans to invest up to $20 billion in 2011 of which 80% is earmarked for its upstream segment.
The company is committed to the cause of continuous research and development and has fixed a billion dollar budget for this purpose in 2011.
TOTAL raised its exploration budget to $2.1 billion, and is pursuing a more diversified approach to make larger discoveries.
At the Peer
BP Plc (BP), which competes with TOTAL SA, reported fourth-quarter 2010 earnings of $1.39 per American Depositary Share (ADS), well below the Zacks Consensus Estimate of $1.63. The quarterly result was marginally below the year-earlier profit level of $1.40. The oil spill incident continues to affect the profitability of the British oil giant.
Our Take
Even though TOTAL has failed to match the consensus expectation, we appreciate the approach of the company to gradually expand its operations worldwide through acquisitions and partnerships.
During December 2010, TOTAL entered into an alliance with Suncor Energy Inc. (SU) for oil sands assets in Alberta, Canada. This alliance raised TOTAL’s interest in Suncor’s Fort Hills project to 39.2%.
TOTAL S.A. currently retains a Zacks #3 Rank (short-term Hold 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.
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