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Total Says It’s Doing OK at $40 Oil as Profit Tops Forecasts

Francois de Beaupuy
·3 mins read

(Bloomberg) --

Total SE continued to ride out tough times for the oil industry by posting third-quarter profit that exceeded the highest analyst estimate, paying down debt and maintaining a generous dividend.

The French energy giant, which has fared better than its rivals through the severe downturn caused by the coronavirus, still offered some cause for concern. The company boasted of its resilience to oil at $40 in a week when prices slumped below that level as the second wave of the pandemic took hold.

The oil market remains uncertain and dependent on the speed of the global recovery, Total said in a statement Friday. Still, the company’s results were a bright spot in a gloomy industry. Third-quarter adjusted net income was $848 million, down 72% from a year earlier but well above the average analyst estimate of $478 million.

“Total is not immune to sector headwinds, and has similar exposures to peers, however the balance sheet remains stronger,” RBC analyst Biraj Borkhataria wrote in a note. “Total has managed to find the balance between growing its low-carbon business, sustaining its core business and maintaining its dividend.”

So far this week, Total’s European peers Repsol SA and BP Plc eked out small profits, while Italy’s Eni SpA and Austria’s OMV AG said they lost money in the quarter. On Thursday, U.S. oil giant Exxon Mobil Corp. said it will slash its global workforce by 15% to adjust to low prices.

While Royal Dutch Shell Plc also reported better-than-expected earnings, the Anglo-Dutch company is struggling to match its French rival’s appeal to investors after slashing its dividend in April. Total is the only European major to leave its payout unscathed this year.

Total shares rose 2.1% to 25.65 euros at 9:43 a.m. in Paris, while the country’s benchmark index dropped slightly.

Low Costs

The company is benefiting from spending cuts initiated since the previous oil-industry downturn five years ago and investments in low-cost barrels. Its upstream operating expenditure has dropped by half since 2014 to $5 a barrel, which Total says is the lowest among the five supermajors.

Total’s gearing, the ratio of net debt to capital, was 22% on Sept. 30, down from 23.6% three months earlier and well below the level of many of its peers. Debt-adjusted cash flow was $4.3 billion, down 41% from a year earlier.

To weather the continuing downturn, Total cut its net capital expenditure forecast for this year by $1 billion to less than $13 billion. It also said it will surpass its $1 billion savings target for operating expenses.

LNG Rebound

Most of the company’s profit in the third quarter came from oil and gas production and gasoline sales at service stations. Total’s liquefied natural gas business was hit by plunging prices and its refineries posted a loss because of weak demand, especially for jet fuel.

“The group benefited during the third quarter from a more favorable environment, with oil prices above $40 a barrel thanks to strong OPEC+ discipline as well as the demand recovery for petroleum products for road transportation,” Total Chief Executive Officer Patrick Pouyanne said in the statement.

The company expects that the increase in oil prices over the second and third quarters will have a positive impact on its average LNG selling price in the fourth quarter. Refining margins have rebounded since the start of the fourth quarter, though remain fragile given the low demand for jet fuel, Total said.

(Updates with analyst comment in the fourth paragraph.)

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©2020 Bloomberg L.P.

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    BYD Company Limited (OTC: BYDDF) enjoyed robust earnings in the third quarter due to a bounce-back in demand for electric vehicles in China and increased sales of face masks.What Happened: The Chinese automaker backed by Berkshire Hathaway Inc (NYSE: BRK-A) (NYSE: BRK-B) Chairman Warren Buffett released its third-quarter results on Thursday.Sales rose 41% to $6.67 billion in the three months through September, while the automaker's net profit increased 1,362% to $262.1 million (RMB 1.75 billion). Earnings per share rose 3,000% from the similar quarter a year ago at $0.093 (RMB 0.62).The company said its new flagship model "Han" and modified flagship model "Tang" both secured a large number of orders and continue to drive strong growth in sales volume.The company said its market supply of materials for pandemic prevention has "gradually stabilized." Why It Matters: Last month, BYD had said there is a strong demand for its luxury sedan "Han," which saw more than 40,000 orders within two months of launch, according to CNBC.View more earnings on BYDDFOther Chinese EV makers such as Xpeng Inc (NASDAQ: XPEV) have also seen a rise in demand for their luxury vehicles.Tesla Inc (NASDAQ: TSLA) is the market leader in China with its Model 3 selling 70,591 units in 2020 through August and accounting for 13% of overall EV sales but Chinese automakers are fast catching up. China Association of Automobile Manufacturers forecasts new EV sales to reach 1.1 million by year-end despite the COVID-19 pandemic, according to Reuters.In 2019, China reportedly accounted for half of the world's EV sales with 1.2 million units sold in the country. Apart from EV sales, BYD also likely benefited from its newly-established mask-making business, Bloomberg noted.Price Action: BYD OTC shares closed 11.5% higher at $20.60 on Thursday. Photo courtesy: Wikimedia See more from Benzinga * Click here for options trades from Benzinga * Geely Plans To Make 30,000 Polestar EVs Annually At New China Plant: Report(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.