Integrated oil and gas company TOTAL S.A. (TOT) reported its third-quarter 2010 operating earnings of $1.42 per share (€1.10 per share) versus the Zacks Consensus Estimate of $1.45 per share. The operating earnings of the company reflected a growth of 18.3% from $1.20 (€0.84 per share) reported in the year-ago period.
Total Revenue
Total revenue of the company at the end of third-quarter 2010 was $51.87 billion (€40.18 billion) versus $48.09 billion (€33.63 billion) in the third quarter of 2009. The year-over-year growth in revenue was 7.9% (up 19.5% in euros).
Production and Realized Price
Total hydrocarbon production averaged 2,340 thousand barrels of oil equivalent (kboe) per day, up 4.3% from the year-ago quarter. The increase was mainly due to production improvements and commissioning of new fields, lower OPEC (Organization of the Petroleum Exporting Countries) reductions and improvement in gas demand, and fewer disruptions in Nigeria.
Liquids and gas production averaged 1,325 thousand barrels (MBbls) per day, down 4% year over year and 5,529 thousand cubic feet (Mcf) per day, up 17% year over year, respectively.
The realized price for Brent was $76.9 per barrel for the third quarter of 2010, compared with $68.1 per barrel in the year-ago period. The average realized liquid price was $72.8 per barrel versus $65.1 per barrel a year ago.
Realized gas prices were $5.13 per Mbtu in the third quarter 2010 versus $4.89 per Mbtu in the third quarter 2009. Realized hydrocarbon prices in the third quarter 2010 increased $4.2 per barrel of oil equivalents (boe) to $54.9 boe from $50.7 per boe in the year-ago period.
Total refinery throughput was 2,068 MBbls per day, down 3% year over year, driven by shutdowns at the Dunkirk refinery and at a distillation unit in the Lindsey refinery.
Operational Update
Purchases, net of inventory variation, at the end of the third quarter 2010 were €23.92 billion versus €18.94 billion in the year-earlier quarter, reflecting a growth of 26.3%.
Operating income in the reported quarter, at €2.7 billion, increased 46% from €1.8 billion in the year-ago period.
Financial Update
Cash and cash equivalents of TOTAL as of September 30, 2010, were €18.3 billion ($23.5 billion) versus €13.8 billion ($17.8 billion) at third-quarter 2009 end.
The net debt-to-equity ratio was 18.2% at the end of third-quarter 2010 versus 20.8% at the end of third-quarter 2009. The company’s objective is to maintain its net debt-to-equity ratio in the range of 25–30% at year-end 2010.
TOTAL’s cash flow from operating activities at the end of third-quarter 2010 was €4.9 billion versus €4.5 billion at the end of third-quarter 2009.
The company will pay an interim dividend of €1.14 per share on November 17, 2010, and the balance of the 2010 final dividend will be paid to the shareholders in May 2011 during the Annual Meeting of the company.
Net investments of the company, excluding acquisitions, during the quarter were €3.01 billion versus €2.45 billion in third-quarter 2009.
Saleand Purchase of Assets
During the third quarter 2010, TOTAL made acquisitions worth €1.02 billion. The investments were made to acquire interests of UTS in Canada.
TOTAL sold assets worth €987 million during the reported quarter, which comprise the sale of Hod and Valhall fields.
Our Take
Even though the company has failed to match the consensus expectation, we appreciate the approach of the company to gradually improve its upstream operation through acquisition and partnership.
TOTAL S.A. currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-tern Neutral rating on the stock.
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