Total Rides Oil's Weak Recovery to Beat Second-Quarter Estimates
French oil company Total's (TOT) - Get Report net profit fell 30% year-on-year in the second quarter to $2.2 billion, but beat analyst estimates, bucking a trend of disappointing results among its European rivals.
Total's profit was 14% higher than a forecast for $1.8 billion after it increased output, cut costs and maintained downstream earnings, where rivals have seen falling refining margins hurt profits.
"Although still volatile, the Brent price has recovered since the start of the year and averaged $46 per barrel in the second quarter," said chairman and CEO Patrick Pouyanne in a statement. "Total captured the benefit of this rebound, and adjusted net income rose to $2.2 billion in the second quarter 2016, an increase of 33% compared to the first quarter 2016."
Total shares climbed almost 2% in early trading on Thursday before slipping back to €43.02 ($47.78), up €0.32, or 0.8%, later in the session.
Total, like its rivals, has responded to the two-year slump in oil prices by cutting costs and said Thursday that it was on target to surpass its $2.4 billion cost-reduction goal for the current year.
Total's results were "driven by strong performance in both E&P and refining and chemicals," said Goldman Sach's analysts Henry Tarr and Peter Hackworth. "Operating cash flow of $4 billion nearly covered capex in the quarter of $4.1 billion, which is a good result in a weak commodity price environment," they noted on Wednesday. Goldman rates total a buy and has a 12-month price target of €48.15 per share.
The French company's results looked even rosier set against those of Royal Dutch Shell (undefined) , which on Thursday posted a second-quarter profit of $1 billion, down 72% year-on-year and more than 50% below analysts' estimates of $2.16 billion. BP (BP) - Get Report earlier in the week posted a 45% fall in adjusted profit, also missing analysts' expectations.
Total's hydrocarbon output over the quarter was 2.42 million barrels, marginally lower than its first-quarter output but up 5% on the second quarter of 2015. The upstream business posted adjusted net operating profit of $1.13 billion, down 28% compared to the second quarter of 2015 and 2.3 time higher than the first quarter of this year.
Refining and chemicals made second-quarter adjusted net profit of $1 billion, down, a 25% decrease on 2015, partly due to decreased throughput at its refining operations due to outages. Total's refining margins of 35% were in line with those of its first quarter, though the company warned that margins had fallen at the start of the third quarter due to a glut of processed petroleum.
Total announced an interim second-quarter dividend of €0.61 that will be paid in January next year.