Integrated oil and gas company TOTAL S.A. (TOT) reported third-quarter 2011 operating earnings of $1.75 per share (€1.24 per share), in line with the Zacks Consensus Estimate. Operating earnings in the reported quarter however gained 23.2% from $1.42 per share (€1.10 per share) in the year-ago period.
Total Revenue
Total revenue at the end of third-quarter 2011 was $64.77 billion (€46.16 billion) as against $51.87 billion (€40.18 billion) in the third quarter of 2010. The year-over-year growth in revenue was 25.9% (up 14.9% in euros).
Production and Realized Price
Total hydrocarbon production during the third quarter 2011 averaged 2,319 thousand barrels of oil equivalent (kboe) per day, down 1.0% year over year.Production in the quarter was afflicted by normal decline, which is net of production ramp-ups on new projects and lower turnarounds and disruptions in Libya, partially offset by the positive impact of a change in the portfolio.
Liquids and gas production during the quarter averaged 1,176 thousand barrels (MBbls) per day, down 11% year over year and 6,228 thousand cubic feet (Mcf) per day, up 13% year over year, respectively.
The realized price for Brent was $113.4 per barrel for the third quarter of 2011, compared with $76.9 per barrel in the year-ago period, reflecting a 47.0% spike. The average realized liquid price increased by 47% year over year to $106.8 per barrel during the third quarter of 2011. Realized gas prices during the third quarter jumped 28% year over year to $6.56 per Mbtu.
Realized hydrocarbon prices in the third quarter 2011 increased $20.4 per barrel of oil equivalents (boe) to $75.3 boe.
Segment Update
Net income in the reported quarter rose 23.8% year over year to $3.95 billion (€2.80 billion) from $3.19 billion (€2.82 billion) in the year-ago quarter largely driven by growth from the Upstream business and Downstream operations.
Upstream net income during the quarter was $3.28 billion, up 19.7% from $2.74 billion reported in third quarter 2010, mainly owing to higher hydrocarbon prices.
Downstream net income during the quarter jumped by 60.7% to $0.54 billion from $0.34 billion in the year-earlier period.The growth was attributable to improved operational performance in refining as well as favorable conditions for supply optimization.
Chemical net income during the quarter was $0.338 billion, reflecting a growth of 2.4% from $0.330 billion reported in the prior-year quarter. The year-over-year growth was due to strong petrochemicals margins in Qatar and South Korea.
Financial Update
TOTAL's cash and cash equivalents as of September 30, 2011, were €19.94 billion versus €18.24 billion as of September 30, 2010.
The net debt-to-equity ratio was 15.2% as of September 30, 2011, down from 18.2% as of September 30, 2010.
TOTAL's cash flow from operation at the end of third quarter 2011 was €5.96 billion versus €4.90 billion at the end of the prior-year period. Cash flow from operations in the first nine months of 2011rose 11% year over year on account of higher net income and favorable changes in working capital.
Sale and Purchase of Assets
The company continues to prudently acquire and dispose assets to attune its resources with its long-term business strategy. In third quarter 2011, net investments of the company, excluding acquisition and including the change in non-current loans, were $4.7 billion (€3.3 billion) versus $3.8 billion (€3.0 billion) in the third quarter of 2010.
In the quarter, TOTAL made acquisitions worth $0.62 billion, down from $1.32 billion in third quarter 2010. The investments were made to acquire a 25% interest in the Tempa Rossa Project in Italy and a 40% interest in exploration blocks in Kenya.
In tandem the company disposed of assets worth $7.00 billion in the reported quarter, up from $1.27 billion of assets sold in the prior-year quarter. The sale during the quarter comprised mainly of shedding its 48.83% interest in CEPSA, a part of the Specialty Chemicals resins activities, a 10% interest in the Ocensa Pipeline in Columbia and sale of its Sanofi shares.
At the Peer
BP Plc (BP), which competes with TOTAL SA, reported third-quarter 2011 earnings of $1.67 per American Depositary Share (ADS), below the Zacks Consensus Estimate of $1.68 and the year-earlier profit of $1.74.
BP Plc's total operating revenue for third quarter 2011 was $97.6 billion, up 30.7% from the year-ago period and also surpassing Zacks Consensus Estimate of $91.5 billion.
Our Take
TOTAL continues to work on increasing its global footprint. In the next few quarters the company is slated to launch a few major projects. The company will start Ofan 2 and Egina in Nigeria, Ichthys in Australia and Tempa Rosa in Italy.
The company continues to reap the benefits of strong liquid and gas price realization. We believe the current market environment, conducive for growth, would aid TOTAL to boost its upstream and refining margins.
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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