French energy major Total, SA (NYSE: TOT – $54.80) reported adjusted net income of $1.04 per share, up 23% from a year ago and above Street views of $0.97. Revenue surged to $37.08 billion from $31.83 billion. “The imbalance between supply and demand has decreased in recent months and Brent rose above $55 per barrel,” Total noted, adding that “markets however should remain volatile given the uncertainties in supply, and inventories, while falling, remain high.” The company said that in this context, it continues to reduce its break-even point by reducing operating costs with a target of $5 billion in savings by 2020 and increasing production by 5% per year until 2022. The solid performance provided a return on equity for Total of nearly 10% and strong cash flow generation of $2.1 billion and $5.7 billion, year-to-date. Adjusted net operating income from Exploration & Production increased a respectable 84% compared to last year. The Downstream segment benefited from favorable refining margins and increased its results 18% from the second quarter, despite the effects of Hurricane Harvey on its American operations. Its Marketing and Services unit announced its entry into the distribution sector in Mexico, the second largest market in Latin America.
The integrated oil and gas producer continues to strengthen its balance sheet, which allows it to implement strategic growth initiatives around the world thus taking advantage of the low-cost environment and launching high-return plays. Indeed, there are many projects in the production pipeline, including phase three of Halfaya in Iraq, early stage operations in Qatar and Argentina and obtaining offshore exploration permits in various locations. Too, ongoing cost-cutting initiatives ought to yield a lower break-even price point for crude oil, currently in the $45-$50 a barrel range. The shares reached a 52-week high in today’s trading and yield 5% at recent quotations. All told, those with a 3- to 5-year holding period may want to consider maintaining their position in good quality Total.