Total Shows Growing Confidence With Pledge to Boost DividendBy
French oil producer will raise payout by 10% from 2018 to 2020
Company will also buy back as much as $5 billion of shares
Total SA signaled growing confidence that the oil-industry slump is ending by pledging to raise its dividend and buy back shares in the coming years.
After riding out the biggest industry downturn in a generation by selling about $10 billion of assets and slashing spending, Total Chief Executive Officer Patrick Pouyanne is joining peers including Statoil ASA and ConocoPhillips in offering greater rewards to shareholders. While the industry’s fourth-quarter earnings have been mixed, most companies are clearly putting the three-year price plunge behind them.
The French energy giant said it would increase its shareholder payout by about 10 percent from 2018 to 2020, after announcing higher profit due to rising oil prices. It intends to buy back as much as $5 billion of stock over the same period, while also preventing any further dilution to investors from the company’s scrip program, in which some dividends are paid in shares rather than cash.
“If the price is higher than $50, we want to be able to share part of the upside with our shareholders,” Pouyanne said on a conference call on Thursday. “Given the production growth in our hands and the purchase of Maersk Oil, our cash flow per share will grow rapidly.”
Total’s adjusted net income climbed 19 percent in the fourth quarter to $2.87 billion following a rebound in crude prices and rising output, said the company based near Paris. That’s in line with the average analyst estimate of $2.85 billion. Rivals Exxon Mobil Corp. and Chevron Corp. fell short of profit estimates in the period, while Royal Dutch Shell Plc missed on cash flow.
“Total appears to have swerved some of the issues encountered by international-oil-company peers,” Jefferies International Ltd. analysts Marc Kofler and Jason Gammel said in a note. The strategy outlined on Thursday is “both affordable and likely to sit well with investors.”
Total shares gained 2 percent to 45.63 euros at 10:28 a.m. in Paris, bucking a wider decline in the European market.
The company’s performance was helped by growth in production at projects initiated by Pouyanne’s predecessor, such as the giant Yamal liquefied natural gas plant in Russia, the Kashagan field in Kazakhstan and smaller developments in the North Sea and West Africa. Daily oil and gas output rose 4.6 percent last year to 2.566 million barrels of oil equivalent and is set to increase by another 6 percent this year, the company said.
Total signaled last year that it would end the share dilution stemming from the so-called scrip as soon as it had enough cash to fully cover capital spending and dividends. Chief Financial Officer Patrick de La Chevardiere said in October that would happen by 2018 with oil at $60 a barrel, or by 2019 at $50 a barrel. Brent crude, the international benchmark, is trading near $65 currently.
- Total expects to achieve more than $4 billion of cost savings in 2018 and make organic investments of $14 billion.
- The company’s 2017 dividend will be 2.48 euros ($3.05) a share, a slight increase from 2.45 euros in 2016. The target is 2.56 euros for 2018 and 2.72 euros by 2020. Total eliminated the discount that encouraged shareholders to participate in the scrip and pledged to buy back additional shares under the program this year to prevent further dilution.
- Cash flow from operations rose 23 percent in the fourth quarter to $8.62 billion. Adjusted net operating income from refining and marketing fell 22 percent from a year earlier to $886 million. Exploration and production jumped 79 percent to $1.81 billion. While crude prices have risen sharply, refining margins have decreased in part due to expanding oil-product inventories, Total said.
- Total’s gas project in Iran remains on track, but “we don’t know what will come out of the U.S. Congress, and of the U.S.-Europe talks which are taking place right now,” said Pouyanne.