Total's Quarterly Profit Beats Estimates on Oil Output, Refining

  • Energy producer maintains dividend, offers payout in new stock
  • Investment target is reduced to $19 billion for 2016

Total SA posted fourth-quarter earnings that beat analyst estimates as rising oil and gas production, higher gasoline sales and profit from refining helped it weather a slump in crude prices. The company deepened cost and investment cuts.

Adjusted net income fell 26 percent from a year earlier to $2.08 billion, Total said Thursday. That exceeded the average $1.77 billion estimate of nine analysts surveyed by Bloomberg. The company reported a net loss of $1.63 billion after writing down the value of assets in Canada and Nigeria, among others.

“Upstream production increased by a record 9.4 percent, driven by the startup of nine projects” in 2015, Chief Executive Officer Patrick Pouyanne said in a statement. “Refining & Chemicals was able to fully benefit from good margins thanks to the high availability of its installations.”

The energy producer, based outside Paris, joins BP Plc and Royal Dutch Shell Plc in cutting operating costs and investments to protect its dividend as a plunge in crude prices dents earnings. Total reiterated plans to fund investor payouts next year from the cash it generates pumping, refining and selling oil, without the need to take on debt or sell assets with crude at $60 a barrel.

The shares dropped 3.3 percent to close at 35.325 euros in Paris, compared with a 4 percent slump in the Stoxx 600 Oil & Gas Index.

Scrip Dividend

The company kept its quarterly dividend unchanged from the previous three months at 61 euro cents a share and offered investors the option of taking the payout in stock discounted by 10 percent in a bid to conserve cash. If crude stays at $30 to $40 a barrel, Total will continue to offer a dividend in shares -- a scrip payout -- in 2017, Pouyanne said on a conference call.

Total reiterated a plan to sell $10 billion of assets in the three years through 2017 including $4 billion in 2016, having already sold $4 billion last year. Divestments may include pipelines and storage units, according to Chief Financial Officer Patrick de la Chevardiere. 

Total expects to exceed a goal to save $3 billion by 2017 compared with its 2014 cost base. The company already made $1.5 billion of savings in 2015 and targets $2.4 billion in 2016.

Spending Program

Total will reduce investments to $19 billion in 2016 from $23 billion last year, lower than forecast in September. Exploration spending alone will drop to $1.5 billion this year from $1.9 billion in 2015, the company said. In 2017, it will invest as much as $19 billion in total.

Crude’s collapse has slashed earnings for oil companies from Exxon Mobil Corp. to BP, leaving them struggling to strike a balance between investing for growth and making shareholder payouts. Total’s De la Chevardiere conceded Thursday that many risk credit-rating downgrades by maintaining dividends amid the oil crash. Total was among several European oil companies assigned a negative outlook by Standard & Poor’s this month.

Total plans to bolster refining margins by curbing processing capacity. The company said Thursday it will achieve its target to reduce European capacity by 20 percent by the end of 2016, one year ahead of the schedule announced in 2012. That will help the Refining & Chemicals division to generate $500 million in additional cash from 2017, Pouyanne said.

Total’s oil and gas production, which climbed 9.4 percent to 2.35 million barrels of oil equivalent a day last year, will rise 4 percent this year with increased output from projects such as the Laggan and Tormore fields west of Shetland, the company said. It repeated a target to boost production by 5 percent a year in the 2014 to 2019 period. Production at Kazakhstan’s Kashagan complex will resume at the end of 2016, Total said.

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