Total Reports Strong Earnings; Revenue Disappoints

French energy major Total, SA (NYSE: TOT – $50.06) reported second quarter adjusted earnings grew 8% year-over-year to $0.97, exceeding the average analyst forecast of $0.95 and $0.07 better than the year-ago period. Sales were $34.48 billion, up from $31.71 billion but below the $35.91 billion estimate, however.  Operating cash flow before working capital changes was $5.3 billion, a 33% increase, while Brent crude only increased by 9%, in the first half of the year. In the Exploration & Production segment, second quarter operating cash flow increased by almost 50% compared to the same quarter last year, benefiting from production growth of more than 3%, driven by start-ups and ramp-ups of new cash-accretive projects, as well as cost reductions. Total is also continuing to prepare for the future, with the signing of a contract related to the development of Phase 11 of the giant South Pars gas field in Iran; the start-up of operations on the giant Al-Shaheen field in Qatar; and the final investment decision for Phase 3 of the Halfaya project in Iraq. Despite a significant refinery shutdown in the Refining & Chemicals segment, the downstream businesses generated $3.4 billion of cash flow in the first half of the year. The company continues to grow its profitable petrochemicals business with the start-up its ethane-based ethylene production at Antwerp, Belgium and the launch of major projects at Port Arthur in the United States and at Daesan in South Korea.

       Total should earn $3.80 per share this year and – depending on the price of crude oil going out to 2018 – the company is expected to earn $4.31 next year; yet far from the $7.00 it had earned before energy prices collapsed. The company also maintained its dividend at $0.69 per share, yielding nearly 5.3%. Investors with a longer-term bent may want to have a look here as total return potential remains solid at this juncture.

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