ii view: Natural gas prices lower Total profits
Oil major Total battles volatile markets but continues to reward income seeking investors.
26th July 2019 12:34
by Keith Bowman from interactive investor
Oil major Total battles volatile markets but continues to reward income seeking investors.
Second-quarter results
- Adjusted net income down 19% to $2.9 billion
- Earnings per share down 20% to $1.05
- Interim dividend up 3.1% to 66-euro cents
Chief executive Patrick Pouyanné said:
"Markets remained volatile with Brent averaging $69 per barrel in the second quarter, an increase of 9% compared to the previous quarter, but natural gas prices were down 36% in Europe and 26% in Asia. In this context, with a slight increase in production to 2.96 Thousand Barrels of Oil Equivalent (Mboe/d), adjusted net income increased by 5% compared to the previous quarter to $2.9 billion, and the return on equity remained above 11%.
Total maintains a solid financial position with gearing of 20.6%, after taking into account the payment of two interim dividends in the quarter."
ii round-up:
Founded in 1924, Total SA (EURONEXT:FP) is a global energy giant. It is active in more than 130 countries and employs about 100,000 personnel. Along with oil and gas, its operations also cover solar energy, biomass and speciality chemicals.
Following its previous acquisition of Engie's LNG assets, Total is the second-largest publicly traded player in the LNG business. Growth for its petrochemicals business was fuelled in 2018 by the launch of projects in the US, Saudi Arabia, South Korea and Algeria.
The oil major reported second-quarter results in line with analyst forecasts.
A near one-fifth fall in net income profit to $2.9 billion came as no surprise given the 36% fall in natural gas prices.
Group gearing rose marginally to 20.6% compared to 19.8% at the end of the first quarter, while the increase in the dividend payment proved in line with prior management guidance.
ii view:
For UK investors, and with the shares priced in euros, buying into the company direct takes on the additional risk of currency volatility. However, shareholder returns in the current ultra-low interest rate environment remain highly attractive – Total offers a dividend yield of around 6%. Allowing for the added currency risk, we believe that Total's place in a diverse and balanced portfolio remains justified.
Positives:
- Shareholder returns remain a focus
- Diversity of business type and geographical location
Negatives:
- Rising tensions in the Middle East could hinder operations in future
- Fossil fuel impact on climate change
The average rating of stock market analysts:
Buy
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.