France's Total SA (TOT - Get Report) showed Friday why it is among analysts' top picks in the oil sector, reporting a 29% increase in third quarter adjusted net income as new projects and acquisitions boosted upstream earnings 84% and increased output by 6%.
Total posted adjusted net income of $2.7 billion in the third quarter, in line with analyst expectations, while free-cash-flow rose to $2.1 billion, up 377% on the same period last year and ahead of analyst consensus.
Total shares traded early Friday at €47.17 ($54.88), up 1.29% on their Thursday close, taking their three-month gain to almost 10%.
"Total continues to capitalize on its strengths: the Group took over as the operator of the giant 300 kb/d Al-Shaheen field in Qatar and announced the acquisition of Maersk Oil, which will strengthen its position in the North Sea and generate strong synergies," said Total Chairman and CEO Patrick Pouyanné in a statement.
Oil companies' earnings have improved sharply over the past year as oil prices rebounded from a collapse in 2016, giving lower cost producers the opportunity to use improved cash flows to pay down debt, revisit stalled projects and pursue acquisitions. International benchmark Brent Crude futures for delivery in December traded Friday morning at $59.37 per barrel, up from below $50 this time last year and more than double the past year's low of near $28.
Commenting on oil prices Total said that "the imbalance between supply and demand has decreased in recent months, markets however should remain volatile given the uncertainties in supply, and inventories, while falling, remain high."
Total, like other oil producers, has also worked to cut its break-even oil price to adjust to a lower price environment. The company said Thursday that it expected to hit a pre-dividend breakeven oil price, excluding M&A, of below $30 a barrel this year and $20 per barrel by 2019.
The French group's $2.1 billion of free cash flow in the third quarter "was strong," noted Goldman Sachs, and would allow "a full coverage of dividends (assuming 100% cash)."
Total said it will pay a third interim dividend of €0.62 cash and continue to offer shareholders the option to take the dividend in shares at a discount of between 0% and 10%, with the final discount yet to be set.
Separately on Thursday, Italian oil company Eni SpA (E) reported third-quarter operating income of €947 million, 14% below analyst consensus, and adjusted net income of €229 million, 35% below consensus. Eni shares fell on the result to trade at €13.82, down just under 1%.
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