Integrated oil and gas company TOTAL S.A. (TOT) reported fourth-quarter 2011 operating earnings of $1.62 per share (€1.20 per share) beating the Zacks Consensus Estimate by a penny. Operating earnings of the company reflected a growth of 5.2% from $1.54 (€1.14 per share) reported in the year-ago period.
TOTAL’s 2011 operating earnings were $7.05 per share (€5.06 per share) compared with $6.08 per share (€4.58 per share) reported in 2010. The results of the company failed to meet the Zacks Consensus Estimate of $7.20.
Total Revenue
Total revenue at the end of fourth-quarter 2011 was $64.02 billion (€47.49 billion) against $54.54 billion (€40.15 billion) in the fourth quarter of 2010. The year-over-year growth in revenue was 17% (up 18.0% in euros).
TOTAL reported full year 2011 revenue of $257.09 billion (€184.69 billion) versus $211.14 billion (€159.27 billion) in 2010. The revenue over the prior year grew at a brisk 22% clip (up 16.0% in euros).
Production and Realized Price
Total hydrocarbon production during the fourth quarter 2011 averaged 2,384 thousand barrels of oil equivalent (kboe) per day, flat with year-ago production.
Total hydrocarbon production during 2011 averaged 2,346 kboe per day, down 1% from 2010 levels. The annual reduction in the production level was due to normal decline in production, security reasons in Libya and fluctuating prices.
Liquids production during the quarter averaged 1,237 thousand barrels (MBbls) per day, down 7% year over year and for the fiscal averaged 1,226 MBbls per day, down 3% year over year. Liquid production got a beating in most of the company’s operating regions.
Gas production during the quarter was 6,201 thousand cubic feet (Mcf) per day, up 9% year over year and for the fiscal was 6,098 thousand cubic feet (Mcf) per day, up 8% year over year. Gas volumes were driven by a strong showing in North America and South America followed by contributions from the Middle East.
Total refinery throughput for 2011 was 1,863 MBbls per day versus 2,009 MBbls per day in 2010. The yearly decline was mainly due to shutdowns and sale of interest in CEPSA.
The realized price for Brent in 2011 was $111.3 per barrel versus $79.5 per barrel in 2010, reflecting a growth of 40%. The average realized liquid price increased by 38% year over year to $105.0 per barrel during fiscal 2011.
Realized gas prices for the fiscal increased 27% year over year to $6.53 per Mbtu from $5.15 Mbtu in 2010. Realized hydrocarbon prices in 2011 increased to $74.9 per barrel of oil equivalents (boe) from $56.7 in 2010.
Financial Update
Cash and cash equivalents of TOTAL as of December 31, 2011, were €14.02 billion versus €14.48 billion at 2010 end.
The net debt-to-equity ratio was 23% at the end of 2011 versus 22.2% at the end of 2010.
TOTAL’s cash flow from operation at the end of 2011 was $27.19 billion, up by 10.9% from the 2010 level of $24.52 billion.
Sale and Purchase of Assets
During 2011, TOTAL made acquisitions worth $12.3 billion (€8.8 billion). The investments were made to acquire 14% of Novatek in Russia, interest in the Fort Hills and Voyageur projects in Canada, assets in the Utica basin and a sizeable 60% of SunPower Corp. (SPWR)
In 2011, TOTAL disposed of assets worth $10.7 billion (€7.7 billion), comprising the sale of TOTAL’s interest in CEPSA and its E&P Cameroon subsidiary, Sanfoli shares, interest in the Joslyn project in Canada and in the Ocensa pipeline in Colombia, marketing assets of UK and part of the Speciality Chemicals resins activities.
TOTAL’s net investment in 2011 was $22.2 billion versus $15.9 billion in 2010 reflecting an increase of 40%. We expect TOTAL to continue to leverage its strong financial position and make strategic investments in 2012.
2012 Preview
TOTAL has plans to invest up to $24 billion in 2012 of which 80% is earmarked for its upstream segment.
TOTAL hopes to implement a new strategy in 2012 aiming to accelerate production growth. The company is expecting to achieve a production growth of 2.5% per year on an average from 2010 through 2015.
In 2012, TOTAL has plans to increase its production from Pazflor in Angola and the start-up of several new projects, which include Usan in Nigeria, Angola LNG, and Bongkot South in Thailand.
TOTAL will continue to follow its aggressive drilling strategy, which paid rich dividends in 2011. The company has raised its exploration budget to $2.5 billion from $2.1 billion to purse its drilling activities in 2012.
At the Peer
BP Plc(BP), which competes with TOTAL SA, reported fourth-quarter 2011 earnings of $1.59 per American Depositary Share (ADS), surpassing the Zacks Consensus Estimate of $1.57.
For the fiscal BP reported earnings of $6.88 per ADS on a replacement cost basis, excluding non-operating items, surpassing the Zacks Consensus Estimate of $6.72 and showing a marked improvement from the year-earlier adjusted profit level of $6.46.
Our Take
The company posted a solid performance in fiscal 2011 owing to its worldwide aggressive drilling strategy with many new discoveries made. Hydrocarbon reserves at the end of 2011 were 11,423 Mboe reflecting a growth of 7% from 2010 levels.
The company has restructured its Downstream and Chemical segments into Refining Chemical and Supply Marketing. We believe this move will enhance TOTAL’s competitiveness in the long run.
TOTAL continues to leverage its strong financial position to make outright acquisitions as well as continue with its aggressive drilling strategy on a global scale. We believe the decision to acquire a 25% interest from Chesapeake Energy Corporation (CHK) in oil rich Utica Shale, by paying $700 million, will boost TOTAL’s prospects in the long run.
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. TOTAL S.A. currently retains a Zacks #3 Rank (short-term Hold rating).
BP PLC (BP): Free Stock Analysis Report
CHESAPEAKE ENGY (CHK): Free Stock Analysis Report
SUNPOWER CORP-A (SPWR): Free Stock Analysis Report
TOTAL FINA SA (TOT): Free Stock Analysis Report
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