Total’s earnings top analyst estimates

Total’s confident appraisal of the year ahead belied what was otherwise a difficult fourth quarter for major oil companies.

Powered by automated translation

Total raised its dividend by 1.6 per cent and said it may give the go-ahead for almost a dozen new projects in the next 18 months after fourth-quarter profit beat analysts’ estimates.

Adjusted net income climbed 16 per cent from a year earlier to US$2.41 billion because of rising oil and gas production and cost cuts, the company based in Courbevoie near Paris said.

Analysts had expected a profit of $2.23bn, according to the average of 16 estimates.

“We’re going to propose to increase the dividend as we have confidence in the future,” the chief executive Patrick Pouyanne said in Paris. “My goal is to launch new projects to prepare the future, while remaining disciplined and cutting costs further because crude prices might drift lower.”

Total’s confident appraisal of the year ahead belied what was otherwise a difficult fourth quarter for major oil companies. The French producer’s peers BP, Royal Dutch Shell and ExxonMobil all fell short of analysts’ estimates as rising profit from oil and gas production failed to fully offset weaker earnings from refining and trading.

Adjusted net operating income jumped 51 per cent from a year earlier to $1.13bn in Total’s exploration and production business, and rose 13 per cent to $1.14bn in the refining and chemicals division. After writing down the value of gas assets in Australia, Angola and the UK because of falling oil and gas prices, Total reported net income of $548 million compared with a loss of $1.63bn a year earlier.

The company said it would raise its quarterly dividend by 1 euro cent to 62 cents, the first increase in three years. It said it should be able to fund operations and the cash part of its dividend without needing to borrow, with crude at about $50 a barrel this year – $5 lower than both its September estimate and the current price of Brent crude.

Exxon and Shell both said in the past week that cash flow covered their spending and dividends at current oil prices, while the UK’s BP needs Brent to rise to $60 a barrel this year to achieve that goal.

The price rebound and lower drilling costs have encouraged Total to sign preliminary deals to produce gas in Iran and invest in oil projects from Brazil to Uganda.

The company said it plans to make final investment decisions on 10 oil and gas production projects in the next 18 months, in countries including Nigeria, Angola, Azerbaijan and Argentina. It also expects to decide on a petrochemical project at Port Arthur in the US this year.

Total reiterated its plan to boost oil and gas production by 5 per cent a year from 2014 to 2020, and by 1 per cent to 2 per cent afterward. Output increased by 4.7 per cent in the fourth quarter from a year earlier to 2.4 million barrels of oil equivalent a day. Volumes will rise by more than 4 per cent this year, it said.

Total cut operating costs by $2.8bn last year compared with 2014, and aims to deepen these savings to $3.5bn in 2017 and $4bn in 2018. So-called organic investments that include acquisitions of oil and gas fields will be between $16bn and $17bn this year, the company said, down from $18.3bn in 2016.

Net debt rose to $27.1bn at the end of 2016 from $26.6bn a year earlier as Total borrowed to make shareholder payouts. The company reiterated a plan to cut its debt gearing to 20 per cent in the medium term, from 27 per cent at the end of last year.

* Bloomberg

Follow The National's Business section on Twitter