Total Lifts Dividend, Plans Growth as Profits Beat Estimates

  • Company targets 10 upstream investment decisions in 18 months
  • Cash flow to fund dividend, spending at $50 a barrel in 2017

Total SA raised its dividend by 1.6 percent 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.

“We’re going to propose to increase the dividend as we have confidence in the future,” Chief Executive Officer Patrick Pouyanne told reporters 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.”

Patrick Pouyanne

Photographer: Jason Alden/Bloomberg

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 Plc, Royal Dutch Shell Plc and Exxon Mobil Corp. all fell short of analysts’ estimates as rising profits from oil and gas production failed to fully offset weaker earnings from refining and trading.

Total’s adjusted net income climbed 16 percent from a year earlier to $2.41 billion due to rising oil and gas production and cost cuts, the company based in Courbevoie near Paris said Thursday. Analysts polled by Bloomberg had expected a profit of $2.23 billion.

“We view this as a solid release, with a small beat to consensus, further cost-reduction targets and a small hike in dividend signaling management confidence,” Goldman Sachs Group Inc. analysts wrote in a note.

Total shares gained as much as 2 percent and were up 0.6 percent at 47.10 euros as of 11:22 a.m. in Paris. The stock has climbed 28 percent in the past 12 months.

Funding Dividend

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

The company said it would raise its quarterly dividend by 1 cent to 62 euro cents, the first increase in three years, while maintaining the option for shareholders to be paid with new Total shares. 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 covers their spending and dividends at current oil prices, while the U.K.’s BP needs Brent to rise to $60 a barrel this year to achieve that goal.

Investment Decisions

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 final go-ahead for Iran’s South Pars 11 project may be made “before the summer” if the U.S. doesn’t impose new sanctions on Iran, the CEO said. The Libra 1 project in Brazil may also be approved within a similar time frame, Pouyanne said.

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 U.S. this year. Total reiterated its plan to boost oil and gas production by 5 percent a year from 2014 to 2020.

The company also said that:
* Output increased by 4.7 percent in the fourth quarter from a year earlier to 2.462 million barrels of oil equivalent a day; volumes will rise by more than 4 percent this year
* Operating costs were cut by $2.8 billion last year compared with 2014
* Targeted savings to climb to $3.5 billion in 2017 and $4 billion in 2018 
* Organic investments including resource renewal will be between $16 billion and $17 billion in 2017, down from $18.3 billion in 2016
* Net debt rose to $27.1 billion at the end of 2016 from $26.6 billion a year earlier
* It may divest as much as $2 billion of pipelines and small fields this year after completing the $3.2 billion sale of its Atotech unit last month

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