TOTAL S.A. (TOT) Beats Estimates

Integrated oil and gas company TOTAL S.A. (TOT) reported its second-quarter 2010 operating earnings of $1.68 per share (€1.32 per share) versus the Zacks Consensus Estimate of $1.60 per share. The operating earnings of the company reflected a growth of 60% from $1.05 (€0.77 per share) reported in the year-ago period.

Total Revenue

Total revenue of the company at the end of second-quarter 2010 was $52.52 billion (€41.32 billion) versus $42.84 billion (€31.43 billion) in the second quarter of 2009. The year-over-year growth in revenue was 23% (up 31% in euros).

Production and Realized Price

Total hydrocarbon production averaged 2,359 thousand barrels of oil equivalent (kboe) per day, up 5% from the year-ago quarter. The increase was mainly due to production improvements and commissioning of new fields, lower OPEC (Organization of the Petroleum Exporting Countries) reductions and improvement in gas demand, and fewer disruptions in Nigeria.

Liquids and gas production averaged 1,327 thousand barrels (MBbls) per day, flat year over year and 5,429 thousand cubic feet (Mcf) per day, up 18% year over year, respectively.

The realized price for Brent was $78.2 per barrel for the second quarter of 2010, compared with $59.91 per barrel in the year-ago period. The average realized liquid price was $74.8 per barrel versus $54.8 per barrel a year ago.

Realized gas prices were $4.82 per Mbtu in the second-quarter 2010 versus $4.71 per Mbtu in the second-quarter 2009. Realized hydrocarbon in the second-quarter 2010 increased $10.6 per barrel of oil equivalents (boe) to $54.8 boe from $44.2 per boe in the year-ago period.

Total refinery throughput was 2,141 MBbls per day, down 2% year over year, driven by shutdowns at the Dunkirk refinery and at a distillation unit in the Normandy refinery. Crude-based utilization rates declined marginally to 78% in the quarter from 79% a year ago. Crude and other feedstock based utilization rates were down to 83% versus 84% in the comparable quarter last year.

Operational Update

Purchases, net of inventory variation, at the end of the second-quarter 2010 were $30.4 billion (€23.9 billion) versus $20.7 billion (€16.3 billion) in the year-earlier quarter.

Operating income in the reported quarter increased 67%, at $6.9 billion, from $4.1 billion in the year-ago period.

Financial Update

Cash and cash equivalents of TOTAL at the end of second-quarter 2010 were $18.9 billion (€14.8 billion) versus $18.2 billion (€14.3 billion) at second-quarter 2009 end.

The net debt to equity ratio was 22.7% at the end of second-quarter 2010 versus 24.7% at the end of second-quarter 2009. The company’s objective is to maintain its net debt-to-equity ratio in the range of 25-30% at year-end 2010.

TOTAL’s cash flow from operating activities at the end of second-quarter 2010 was €4.9 billion versus €1.9 billion at the end of second-quarter 2009, reflecting a convincing increase in net income complemented by a lower increase in working capital requirements.

The company will pay an interim dividend of €1.14 per share on November 17, 2010.

Investments of the company, excluding acquisitions, for 2010 are expected to be in line with the budget of 2010 at €18 billion.

Sale and Purchase of Assets

During the second-quarter 2010, TOTAL made acquisitions worth €305 million. The investments were made to acquire interests in new energies and further investments in the Barnett Shale in the U.S.

TOTAL sold assets worth €758 million during the reported quarter, which comprise the sale of Mapa Spontex and sales of Sanofi-Aventis shares.

Our Take

We appreciate the move taken by TOTAL to increase its African presence by the acquisition of Chevron Corp’s (CVX) 45.9% interest in the offshore oil block, which is in the Joint Development Zone (JDZ) in Nigeria.

During the week, TOTAL’s peer, Exxon Mobil (XOM), reported earnings results; its net income nearly doubled during the reported quarter. Royal Dutch Shell PLC (RDS.A), another of the company’s peers, posted a 15% earnings increase.

We retain a short-term Zacks #3 Rank (Hold) on TOTAL.

TOTAL FINA SA (TOT): Free Stock Analysis Report

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