Total Posts Strong Results; Hikes Dividend
American depository shares of Total SA (NYSE: TOT – $50.47) are rising after the French oil major reported fourth quarter results which were better-than-expected and set out investment and cost-cutting targets for the year. For the period, adjusted earnings were $0.96 per share, up 9% year-over-year and above the $0.88 per share consensus. Revenues rose to $36.87 billion from $32.29 billion and beat expectations for $33.68 billion. For the year 2016, TOT earned an adjusted $3.38 per share and the Street is looking for $4.54 this year and possibly $5.65 in 2018. Total signaled that it has entered a new phase in the oil-industry saying it is ready for new projects and acquisitions, after cost cuts, increased output and higher crude prices contributed to better-than-expected fourth-quarter results. The company said it is sufficiently confident about the outlook for the oil market that it could give the green light to as many as 10 new projects within the next 18 months.
Looking ahead, Total said it expects to invest between $16 – $17 billion in 2017 and will continue to cut costs in an effort to achieve $3.5 billion of cost savings this year and lower production costs to $5.50/barrels of oil equivalent for the year. Total added it will distribute a dividend of $0.66 per share for fourth quarter up 1.6% from the previous three interim dividends, which will yield investors 5.2% at current levels. I believe Total can continue to adapt to weak pricing thanks to its integrated model with sizable midstream and downstream operations that benefit from weaker energy prices to some degree. The shares – up nearly 17% over the past year – can be retained for further recovery and ample income.