Total Share Discussion Threads

[waldron] 13/6/2017 18:05

By Russell Gold

France's Total SA, one of the world's largest oil companies, sent its top executives to Silicon Valley last summer, where they met with tech investors and futurists. At Tesla Inc.'s Bay Area factory, a Total executive tweeted a photo of a gleaming, red Model S -- an electric car that burns no oil products at all.

The trip was meant to "open their minds," said Total Chairman and Chief Executive Patrick Pouyanné.

Total, like its peers Exxon Mobil Corp. and Royal Dutch Shell PLC, was built to service the world's massive demand for crude oil. Betting that demand will peak in the next few decades, Mr. Pouyanné wants to turn his company into one of the world's biggest suppliers of electricity, or what he often calls "the energy of the 21st century."

More than any other oil major, Total sees electricity as a hedge against oil's eventual decline and is assembling a new business around it. Last summer, it paid $1 billion for a French maker of industrial batteries. It bought a small utility that supplies gas and renewable power to households in Belgium and owns a majority stake in SunPower Corp., a California company that makes high-efficiency solar panels for governments, businesses and households.

If all goes to plan, a large piece of Total's business will one day be selling electricity to homeowners and businesses, some generated by natural gas it has extracted and some from solar panels and battery packs. By 2035, Mr. Pouyanné said, 20% of Total's energy output will be low-carbon energy such as electricity from renewable sources like wind and solar. The company recently created a "gas, renewables and power" reporting segment, which in 2016 earned about 5% of Total's $9.42 billion net operating income.

For decades, Total and other large oil companies have employed a model pioneered by John D. Rockefeller over a century ago. They find crude, pump it out of the ground, refine it into different fuels and chemicals, then sell these products to motorists, airlines and manufacturers. As oil prices rise and fall, different parts of this value chain make money.

Today, a prolonged downturn in oil prices has dented revenues and profits at the world's large producers. Oil demand is expected to come under further pressure as auto makers improve fuel efficiency, electric vehicles become more popular and many countries push ahead with commitments to burn fewer carbon-intensive fuels.

Producing and selling electricity is a very different business. While oil is a commodity that can be extracted in one locale and stored, shipped and sold to other parts of the world, electricity must be produced and consumed simultaneously. Power grids tend to be regional, so electricity generated in Europe can't be sold to Latin America.

Most electricity is generated from coal or natural gas, and increasingly from wind, solar and other renewable energy sources. Burning oil currently generates just 4.3% of global electricity, a share that has halved in the past two decades and is expected to shrink to 2.5% by 2025, according to the International Energy Agency, a Paris-based group that monitors energy trends.

Total is already a large producer of natural gas, a cleaner-burning fuel that is expected to overtake coal by 2040 as a source of electricity because of its flexibility and lower emissions, according to the IEA. While rivals including Exxon and Shell are also bulking up on natural gas production, Total wants to go further and enter the power business.

Predicting and betting on shifts in energy consumption is a notoriously tricky business. U.K. energy giant BP PLC invested heavily in solar power in 2000, only to shut that business in 2011 after struggling to make money. Shell in 2008 pulled out of a large offshore wind power project near the mouth of London's Thames River after costs mounted.

"Oil companies like to talk about themselves as energy companies, but they are not energy companies. They are commodity companies," said Bob Lukefahr, who helped develop BP's renewable strategy in the 2000s.

Capital budgets are beholden to commodity prices and new oil ventures are costly, which make it difficult for companies to make large investments into new types of power, said Mr. Lukefahr.

At the same time, companies should be ready for the changes brought by technology, said Adam Sieminski, who stepped down as the head of the Energy Information Administration, the statistical arm of the U.S. Energy Department, in January. "You don't want to be the best buggy-whip manufacturer in the world," he said.

Mr. Pouyanné said Total remains "first an oil-and-gas company," and that remains a lucrative business. The company's net income last year, $6.2 billion, was second only to the much-larger Exxon among its Western oil peers. At the same time, he said some investors feel Total needs a diversification plan if governments and the public increasingly demand cleaner energy.

"They have some questions about what will be the impact of climate change on our company. We are trying to bring them some answers," he said.

Some of the challenges are apparent in Mr. Pouyanné's own household. He said he tried and failed to persuade his wife that they should buy an electric car. He still drives a Renault with a conventional engine.

Most industry forecasters expect oil to remain a major source of energy fueling global economies. The IEA says consumer demand for oil will keep growing for another two decades unless governments take sharper action to curb emissions.

But electricity consumption is expected to grow faster than oil -- 2% a year through 2040, compared with oil's 0.5% growth, according to the IEA.

Underlying this shift is a global push to use fuels with lower carbon emissions. Over 140 countries have ratified an 2015 agreement struck in Paris to reduce emissions as a way to tackle climate change. Their methods generally include shifting away from oil and coal and toward energy sources like gas, renewables and even nuclear, which all generate electricity. The U.S. has since said it plans to pull out of the accord.

Producing clean energy was much more expensive in the late 1990s and early 2000s, when oil companies conducted highly public experiments with alternative energy sources. Production costs for solar panels and other renewable energy projects have since plummeted.

"Sometimes you can be wrong if you are 15 years" too soon, said Mr. Pouyanné.

Shell last year led a consortium that won a bid to build a wind farm off the coast of Holland that could power a million homes at prices lower than competing coal and gas projects. Norwegian oil-and-gas company Statoil ASA recently announced plans to increase its spending on renewables from 5% today to at least 15% by 2030, with an emphasis on offshore wind.

Mr. Pouyanné, 53 years old, accelerated Total's expansion into electricity after two events rattled the company. In October 2014, Total's then-CEO, Christophe de Margerie, was killed in an airplane crash in Russia. Mr. Pouyanné, who was running Total's refining and chemicals business, was quickly promoted to the top job.

At the same time, a glut of oil was overwhelming demand, causing oil prices to collapse from a high of $107.26 a barrel to $53.27 by the end of the year. Total recorded a $5.7 billion loss in the final quarter of 2014, its worst quarterly result in decades, and the first quarter with Mr. Pouyanné at the helm.

"I became CEO at the worst possible moment," he said.

He took over a nearly century-old company with fossil fuel operations in 130 countries. Like its fellow Western oil companies, Total had large exploration, refining and chemical divisions. Mr. Pouyanné began cutting costs including the company's capital budget. Total returned to profitability in 2015 even as oil prices fell further. Oil currently trades around $46 a barrel.

Mr. de Margerie, his predecessor, was outspoken about the challenges facing the oil business. At an industry conference in London in 2007, the former CEO surprised the crowd by declaring that oil-production growth forecasts were too optimistic because of depleting conventional reservoirs.

That outlook prompted Total to begin exploring alternative sources of energy. It paid $1.37 billion for a 60% stake in SunPower in 2011, and scooped up smaller stakes in early-stage clean-energy startups.

Total's stake in SunPower has since lost more than half its market value amid a sharp decline in prices of solar panels. SunPower has posted losses for the past two years.

Unlike oil and gas, where output can be turned up or down in response to demand, solar energy is produced only when the sun is shining. Its value to consumers and power companies is limited unless the energy can be stored. That thinking drove Mr. Pouyanné in 2016 to purchase Saft Groupe SA, a French battery maker

Saft supplied high-end batteries for satellites, airplanes and smart meters. While much of the battery industry focused on bringing down prices, Saft specialized in long-life and durability. When the European Space Agency sends a robotic rover to Mars in 2020, the exploration vehicle will use Saft batteries.

Saft Chairman and CEO Ghislain Lescuyer said Saft is looking for ways to work with SunPower. While he declined to discuss details, such a partnership could produce a solar panel-and-battery combination that could compete with Tesla -- which recently acquired SolarCity Corp. -- and other companies exploring similar energy products.

Tom Werner, SunPower's Chairman and CEO, said the company benefits from Total's focus on long-term strategy and size, even though it can be at odds with the speed and nimbleness required of a solar company. "There is no model to emulate," he said.

Last June, Total acquired another piece of the puzzle it is trying to assemble when it paid about $200 million for Lampiris NV, a gas and renewable power retailer in Belgium. After operating for a little over a decade in the Belgian residential energy market, the company won more than one million customers.

Now that Total controls companies that generate, store and sell electricity. Mr. Pouyanné is trying to figure out how to fit the pieces together.

"To be clear, these are investments," he said of Total's foray into electricity. "We have to be patient."

Write to Russell Gold at [e-mail]



(END) Dow Jones Newswires

June 13, 2017 11:19 ET (15:19 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.

[waldron] 10/6/2017 09:11

Ex-dividend date for the remainder of the 2016 dividend
September 25, 2017

[sarkasm] 05/6/2017 22:32

Total asks to revisit South Sudan oil blocks, minister says
By Paul Burkhardt on 6/5/2017

JOHANNESBURG (Bloomberg) -- Total SA approached South Sudan about developing two of its biggest oil blocks after previous talks on the fields collapsed, according to the African nation’s petroleum minister.

"They have written to me that they are still interested" in blocks B1 and B2, Ezekiel Lol Gatkuoth said Monday in an interview in Cape Town. Tullow Oil Plc has also asked to discuss the blocks, he said.

South Sudan needs foreign investment to ramp up oil production -- currently at about 130,000 bpd -- after conflict that erupted in 2013 cut output. Discussions with Total on blocks B1 and B2 reached an impasse in April, prompting the country to open negotiations to new investors. The blocks are part of the former Block B, which the government says is the nation’s largest untapped oil deposit.

Total’s officials “weren’t forthcoming” during the discussions, Gatkuoth said. The parties disagreed on the length of the exploration period, capital-gains taxes and royalty terms, he said.

Emails to Total weren’t immediately answered.

"We’re still in discussions with the government around opportunities in South Sudan," said Robin Sutherland, general manager of new ventures in Africa for Tullow. "We think it’s a good opportunity” and there are "many options" for transporting oil from the nation with pipelines planned in neighboring Uganda and Kenya, he said.

Block B, a 120,000-km2 (46,300-mi2) area, was divided into three portions in 2012. South Sudan, which has Sub-Saharan Africa’s third-biggest oil reserves according to BP Plc, aims to pump 200,000 bpd by the end of this year and 350,000 bpd by mid-2018.

[ariane] 05/6/2017 15:23

TOTAL : La tendance baissière peut reprendre
TEC le 05/06/2017 à 07:38
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TOTAL : La tendance baissière peut reprendre

SYNTHESE

Le MACD est négatif et inférieur à sa ligne de signal. Cette configuration dégrade les perspectives sur le titre. Le RSI n'indique pas encore une survente donc la poursuite de la baisse est techniquement possible. Inférieurs à 20, les stochastiques sont extrèmement bas. Les volumes échangé;s sont inférieurs à la moyenne des volumes sur les 10 derniers jours.

MOUVEMENTS ET NIVEAUX

Le mouvement haussier semble être arrêté. Le titre est sous sa moyenne mobile à 50 jours située à 47.58 EUR. Le premier support est à 45.98 EUR, puis à 45.5 EUR et la résistance est à 48.86 EUR, puis à 49.34 EUR.
Dernier cours : 46.8
Support : 45.98 / 45.5
Resistance : 48.86 / 49.34
Opinion court terme : negative
Opinion moyen terme : neutre

[grupo] 02/6/2017 14:54

ST. PETERSBURG--Top officials and executives from major oil-producing countries and leading companies said that U.S. President Donald Trump's decision to pull out of the Paris climate accord was unlikely to have a major effect on efforts to reduce carbon emissions, as technological advances make cleaner forms of energy more economically viable.

Speaking at an economic forum in Russia, chief executives from BP PLC, Royal Dutch Shell PLC and Total SA said they are still expecting the shift to cleaner energy to continue, including in the U.S.

"We are in an energy transition. The energy transition is unstoppable," said Ben van Beurden, CEO of Shell. "Ultimately it is policy, public sentiment, but also technology that's driving it. It is fundamentally a force that cannot be stopped, irrespective of what any actors, even if they are large actors like the United States, decide to do in relation to Paris."

Mr. Trump said Thursday that he will withdraw the U.S. from the Paris accord in an effort to boost the country's industry and independence.

He said the U.S. would begin negotiations to either re-enter the Paris deal under new terms or create a new deal that he considers fair, an idea immediately rejected by several countries.

Saudi Arabian Energy Minister Khalid Al-Falih said he expected U.S. companies to continue to push forward new technology to reduce emissions.

"I wouldn't write off the United States' contribution to climate action. In the United States, power is dispersed. There are companies, innovation. The United States will end up being a significant player in the climate conversation," he said.

Patrick Pouyanne, CEO of French oil company Total, said companies would continue to invest in cleaner forms of energy, a decision driven by companies' search for profit.

"Consumers want cheap energy," he said. "We want to stay a major energy company in 20-25 years."

Still, Mohammed Barkindo, secretary-general of the Organization of the Petroleum Exporting Countries, said achieving the aim of the Paris accord of keeping average global temperatures from rising more than 2 degrees Celsius, or 3.6 degrees Fahrenheit, would be tough without U.S. involvement.

Accomplishing the goal "without the United States looks very challenging and almost a task that the world will have to revisit," he said.

Write to James Marson at [e-mail] and Elena Cherney at [e-mail]



(END) Dow Jones Newswires

June 02, 2017 09:05 ET (13:05 GMT)

[grupo] 02/6/2017 09:28

Total S.A. - A Complex, Opportunistically Priced Dividend
Jun. 2, 2017 3:07 AM ET|
About: TOTAL S.A. (TOT)
Jacob Urban
Jacob Urban
Energy, tech, brick & mortar retail
LinkedIn
(362 followers)
Summary

Total's high dividend yield remains attractive after accounting for France's unique withholding tax.

The company's recent strong financial performance suggests the company's worst days may be in the past, and continued production growth appears to be on the horizon.

Total appears to be uniquely positioned in renewables among the world's major integrated oil companies.

Shares of French oil major Total S.A. (NYSE:TOT) surged higher after the company reported a better than expected profit last quarter, reflecting increasingly favorable investor sentiment (a fellow contributor even laid out a strong case for this sentiment). Oil prices regaining the $50/Bbl mark and France electing Emmanuel Macron, widely seen as a Pro-Europe and Pro-Business centrist, also helped contribute to Total's strong recent stock price performance.

Before investors become dazzled by Total's high dividend yield and recent profit surge, an understanding of the French withholding tax that the company's dividends are subjected to must be obtained. Although many in the financial community have strayed from Total S.A. due to the infamous withholding tax on dividends, an analysis comparing its dividend yield to the company's competitors reveals that the company offers a robust dividend at a fair price, even after accounting for the withholding tax.

A Confusing Dividend

Given the company's recently announced impressive quarter, in which Total earned $2.8 billion in Net Income, many are quick to turn to the company's 6.41% dividend yield and salivate over the opportunity. Adding to the allure of the dividend are the facts that the company's worst days seem to be in the past and that Total's downstream unit gave the company the power to continue to pay its dividend throughout oil's wild ride lower the past couple of years.

Source: Company Website

Acting on these facts alone would be to miss a crucial feature of Total's dividend: the French withholding tax. To some, the withholding tax is reason to forgo an investment in Total altogether, despite the company's track record of raising or maintaining the dividend for 30 straight years. In many comments section on this website, there have been spirited debates over what the withholding tax entails for investors in the US and to what extent it is avoidable.

Total's website explains France's withholding tax clearly to shareholders: "a 30% tax is withheld at source from your dividends, but it can be reduced if there is a tax agreement between France and your country of residence. The dividend withholding tax rate is reduced to 15% in most cases though." According to the France Embassy in the United States website, the U.S. is indeed a country where investors can file to have the tax reduced to 15%, according to Article 10 of the tax treaty between France and the United States regarding direct taxes.

Still, this comes with added complications for investors, with the embassy breaking down the many steps it takes to obtain the reduction: "To benefit from this 15% reduced withholding rate , the US residents must first provide the paying agent with a certificate of residence for the application of tax treaties forms 5000-EN and 5001-EN This form must be accompanied by a certificate provided by the US tax authorities (form 6166) or be validated by a US financial institution.

In order to obtain the US form 6166, the taxpayer must file the US form 8802 available on the IRS web site www.irs.gov."

Given this understanding, investors can begin to make a more informed evaluation of Total S.A. As the chart below shows, the enticing 6.41% yield is still 5.45% after the reduction to a 15% withholding tax, or to 4.49% for investors who neglect to file for the reduction.

Screen Shot 2017-05-31 at 8.07.43 PM.png

Data Source: Company Filings, Calculations by Author

Perhaps there are many investors who prefer to avoid any withholding tax complications altogether, as a comparative suggests that Total S.A. offers one of the best yields for the price among the world's integrated oil companies. This reluctance could be the reason Total is so attractively priced compared to its peers, demonstrated by the analysis below.

The fourth column in the chart below is derived from dividing the company's P/E ratio by the dividend yield (expressed in numerical, not percentage, terms), and it shows that Total S.A.'s yield is the cheapest. After accounting for a 15% withholding tax, Total's 5.45% yield still represents the second most favorably priced dividend, behind only Royal Dutch Shell.

Screen Shot 2017-05-31 at 8.07.11 PM.png

Data Source: Yahoo Finance, Calculations by Author

Total's strong balance sheet - manifested by the company's Net-Debt-to-Equity ratio of 22.7% as of the end of March 2017- and recent impressive financial performance make its 6.41% yield (or 5.45% when accounting for a 15% withholding tax) appear as a potentially lucrative opportunity for shareholders. Moreover, the company's investment strategy and production mix provide additional reasons to select Total instead of its peers.

Why Total Instead of Other Integrated Firms

Owning Total S.A. due to its favorably priced dividend only makes sense if the company's strategy provides reasons to believe that the dividend can continue to grow. Although Total's competitive advantages have been widely covered by other contributors, value can still be gained by exploring the company's unique position in the renewables market, Total's finally rebounding production, and diversified revenue mix. After all, there are a handful (perhaps two handfuls) of other opportunities for investors looking for an integrated oil company with a sizable dividend yield - I myself am long BP.

Among other advantages, Total's differentiation from peers results from the company's commitment to positioning itself as a leader in sustainable energy. In addition to the company's strides with SunPower, Total's long-term goals suggest that renewables are more of a central focus to its business than to competitors: "We are investing in solar power and bioenergies, with the aim of increasing the share of low-carbon businesses in our portfolio to around 20% in 20 years' time." The business unit renewables falls under, part of what Total calls "Gas, Renewables & Power" even garners a high return on average capital employed, earning a return of 8.8% for the twelve months ended March 31, 2017; this outperformed the company's Exploration & Production segment, which earned just a 4% return on average capital employed over the same time period.

With renewables expected to garner an increased share of the overall global energy mix - BP's Annual Energy Outlook 2017 edition projects renewables to be the fastest growing source of primary energy through 2035, as depicted below - Total holding a stronger footing here than other major oil companies will enable the company to succeed well into the future.

Image Source: BP Annual Energy Outlook 2017 Edition

Perhaps most importantly, following an extended period of waning production Total finally returned to reporting growing production. Last quarter, combined liquids and gas production increased 4% quarter over quarter to almost 2.6 million barrels of oil equivalent per day, driven by a 29% quarter-over-quarter increase in the company's Americas segment. Gas production growth outpaced oil growth on a percentage basis, which could help mitigate the company's exposure to any future collapse in oil prices. Furthermore, Total's future production could be fueled by further asset acquisitions, which, during the Q1 Conference Call, the company noted could be taken advantage of in today's market of lower energy prices: "Asset sale proceeds increase our ability to take advantage of the current environment and add resources to the portfolio as we have done in recent deals in Brazil, Uganda and the U.S."

The size of Total's downstream operations relative to its Exploration and Production business creates another advantage, allowing the company to continue to generate cash to help pay its dividend during downturns in commodity cycles. The chart below breaks down Total's first quarter net operating income by business segment, revealing that the downstream provides a nice counter-balance to the price-sensitive upstream business.

Data Source: Company Press Release, Calculations By Author

All told, the many competing arguments surrounding the bear and bull case for Total should not dismiss the fact discovered within this report that the company's dividend is attractively priced even when accounting for France's withholding tax. The company's earnings are buoyed by a robust downstream, and its growing production coupled with the company's long-term vision for renewables make it a compelling, differentiated investment.

Disclosure: I am/we are long BP.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Tax laws are very complex and investors are reminded to always consult with a certified tax professional regarding tax related issues. Nothing in this article is to be used as tax advice. As always, investors are reminded to conduct their own due diligence before making any investment. This article and all of its content is intended for informational purposes only and should not be used as the basis of an investment.

[waldron] 22/5/2017 17:19

June 05, 2017
Ex-dividend date for the remainder of the 2016 dividend

[ariane] 13/5/2017 10:20

June 05, 2017
Ex-dividend date for the remainder of the 2016 dividend
September 25, 2017
Ex-dividend date for the 1st 2017 interim dividend
December 19, 2017
Ex-dividend date for the 2nd 2017 interim dividend

[waldron] 10/5/2017 18:10

640/5000
Published on 10/05/2017 at 14h12

Macquarie analyst team revised Wednesday its list of top picks in Europe with the bias to strengthen exposure to cyclical stocks at the expense of defensive ones. In this logic, the broker integrated into its new sample Dia, Total, Orion, Infineon, Innogy and Proximus. By way of argument, Macquarie advances the particularly atractive valorisation of the French oil group and a favorable momentum. Compared to its selection of "blue chips" last month, the research firm chose to keep ACS, ThyssenKrupp, Peugeot, Land Securities.

[grupo guitarlumber] 04/5/2017 18:53

LONDON-- Royal Dutch Shell PLC Thursday capped a bumper set of results for the world's biggest oil companies, reporting its highest quarterly profit since mid-2015 and illustrating how a fragile oil-price recovery and years of cost-cutting are buoying big crude producers.

Results from Shell and Norway's state-controlled Statoil ASA--which also reported a big rise in profits Thursday--came after U.S. giant Exxon Mobil Corp. last week reported its best quarter since 2015, and Chevron Corp., France's Total SA and BP PLC said profits increased sharply for the first quarter.

Beyond the rising profits, analysts lauded oil companies' better-than-expected cash generation--a metric that has become increasingly important as the businesses scrambled to bring their costs into balance with lower oil prices over the last two years. Since prices slumped in 2014, large producers in many quarters have had cash flow that is lower than their spending, forcing them to borrow money to pay dividends to investors.

The recent results show how billions of dollars of cost cuts across the industry have begun to pay off, adding to optimism that even if prices don't recover beyond their current levels in the near term, the companies have weathered the worst of the market rout.

"Are we out of the woods? Yeah, absolutely," said Oswald Clint, an analyst at Bernstein, highlighting the benefits of the companies' efforts to streamline since oil prices began to fall.

Shell said its first-quarter profit more than quadrupled from a year earlier to $3.4 billion. Quarter-on-quarter, the company saw higher earnings in all business segments.

Shell's cash flow from operating activities grew to $9.5 billion, up from $700 million in the first quarter of 2016, covering the company's cash dividends for the three months.

Statoil reported net first-quarter earnings of $1.06 billion, up from $611 million a year earlier.

But analysts warn the recovery could prove fragile. Much of the rebound is due to higher oil prices, and that may not be sustainable. International benchmark Brent crude dipped below $50 a barrel Thursday for the first time since March.

Shell Chief Financial Officer Jessica Uhl said the company has been restructuring so it can better maintain profits in the face of oil-price declines. Shell has sold some businesses that don't match its focus on deep-water drilling and liquefied natural gas, and cut costs across the business following its roughly $50 billion acquisition of BG Group last year.

Shell also made progress in lowering debt, which rose sharply last year when the company turned to financing to pay for the BG deal. It is now more than two-thirds of the way through a $30 billion divestment program crucial to its plan to streamline its portfolio by next year as part of efforts to reduce debt.

"This is about transforming the company for the future," Ms. Uhl said. "We're not waiting for prices to increase."

There are signs that the oil price may remain depressed. While the Organization of the Petroleum Exporting Countries has imposed production limits to boost prices, U.S. shale producers have kept pumping at high volumes, holding back the rebound. Over the past week, executives repeatedly stressed they expect continued uncertainty and they remain conservative on spending.

"We are facing a volatile environment." Total's Chief Financial Officer Patrick de la Chevardière told investors last week. "It is not, today, the appropriate time to reduce our effort."

Write to Sarah Kent at [e-mail]



(END) Dow Jones Newswires

May 04, 2017 11:36 ET (15:36 GMT)

[grupo guitarlumber] 03/5/2017 21:48

French Oil Giant Total Earning Like It's 2014
By Nick Cunningham - May 03, 2017, 2:35 PM CDT

Profits are finally on the rise again for the oil majors. Big Oil reported its best quarter in years, a sign that the industry is on the upswing even though oil prices have failed to rally much above $50 per barrel.

The first quarter earnings reports from the oil majors are almost uniformly positive compared to a year ago and much better than even analysts had expected. Exxon shocked on the upside, beating estimates by a mile with earnings double the levels of 2016. Exxon’s big jump in cash flow allowed it to pay for capex and even cover its dividend, assuaging concerns about the durability of the ever-increasing shareholder payout. Chevron swung to a large profit of $2.7 billion in the first quarter, compared to a $725 million loss a year earlier.

And the second quarter, so far, is looking good as well. Bloomberg estimates that Exxon is on track for a more than 130 percent increase in earnings per share in the second quarter compared to the same period a year earlier. Chevron too is slated to report its best second quarter since 2014.

But French oil giant Total SA offered some of the more interesting tidbits from the earnings reports. Total saw its quarterly profits jump by 56 percent, which wasn’t all that notable given the broader improvement in the financials for the world’s largest oil companies over the past 12 months. To a certain extent, the rebound in profits is merely a reflection of higher oil prices compared to 2016.

However, it was Total’s free cash flow that stands out – at $1.7 billion in the first quarter of 2017, excluding asset sales and acquisitions, Total’s free cash flow rose to essentially the same levels as in 2013 when oil traded at $100 per barrel. In other words, Total is back to pre-2014 financials despite oil trading at half the price.
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That impressive performance has allowed Total to look towards growth. The French company is set to roll out a series of final investment decisions over the next year and a half. First up is a greenlight on a drilling campaign in Argentina’s Vaca Muerta shale, the first major investment for Total in several years and the first of 10 projects that will move forward. Other projects set for development are Total’s holdings in Azerbaijan, offshore Brazil, Uganda and maybe Iran. Total expects to grow its overall production by 4 percent this year and the start of new drilling projects will likely lead to larger production gains in the years ahead.
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Another intriguing development from Total is the company’s strategy to invest in upstream production now to be well-positioned for a tighter oil market tomorrow. Echoing the IEA’s repeated warnings, Total sees oil supply falling short of demand by the end of the decade. Meanwhile, costs are still relatively low right now because of the cyclical market downturn, so development costs can be kept in check. “The costs are low, so it’s the right time to invest,” Pouyanne said last week. “Our strategy is to take advantage of this market, where you have a lot of weak players.”

That approach is a contrast to some of the other oil majors. Most of them are scaling back investments on high-cost production and doubling down on U.S. shale, where drilling costs are lower (on a per well basis, at least) and the turnarounds vastly shorter. Spending on shale is comparatively lower risk in today’s environment; almost a conservative strategy. Chevron, for example, failed to replace the oil it produced last year and is focusing on slimming down, using three-quarters of its 2017 drilling budget on shale. Gone are the days of spending billions on massive LNG export terminals. Royal Dutch Shell, highly indebted because of its $50 billion purchase of BG Group, will also continue to shed assets as it tries to reduce its debt.

To be sure, Total is not the only one looking to step up spending and grow production. ExxonMobil is rolling the dice on a major offshore drilling program in Guyana. However, Total is less than half the size of Exxon. Moreover, Exxon is still playing it cautious, keeping spending relatively conservative. Also its 2016 production actually declined by 4 percent.

In many ways, Total has outpaced its rivals during the three-year oil market downturn and is in a stronger position to grow going forward.

By Nick Cunningham of Oilprice.com