Big Oil has enjoyed more favorable conditions this year thanks to rising crude prices and recovering fuel demand, but Total is in a better position than many of its peers.
While BP Plc and Royal Dutch Shell Plc are under pressure to return more money to investors after slashing their dividends in 2020, Total maintained its payout throughout the crisis and will funnel its cash into new projects and the transition to cleaner energy. The French company’s renewable power output more than doubled in the first quarter and it gave the green light to a multibillion-dollar oil development in Uganda.
“The Group is accelerating its transformation into a broad energy company,” Chief Executive Officer Patrick Pouyanne said in a statement on Thursday. “The integrated gas, renewables and power segment reported adjusted net operating income of $1 billion, the highest in its history.”
Total’s adjusted net income in the first quarter was $3 billion, up 69% from a year earlier and surpassing even the pre-pandemic earnings of the same period in 2019, according to the statement. It was well above the average analyst estimate of $2.35 billion.
Earnings at the company’s gas, renewables and power business were boosted by higher electricity sales and a good performance in gas trading, offsetting a drop in the price of liquefied natural gas. The recent rally in oil prices will have a positive impact on the average LNG selling price over the next six months, given the lag effect on pricing formulas, Total said.
Total’s debt-adjusted cash flow, which underpins dividends and investments, rose 34% to $5.8 billion. Excluding leases, the ratio of net debt to capital fell to 19.5% as of March 31, down from 21.7% at the end of 2020.
The company, which accelerated cost cuts and halted share buybacks at the start of the pandemic last year, struck a prudent note regarding future spending, saying that oil demand is still being affected by the Covid-19 crisis. Total kept its first interim dividend for the year unchanged at 66 euro cents ($0.80) per share, and said net investments this year will be stable between $12 billion and $13 billion.
About a quarter of capital expenditure will be allocated to renewables and electricity. The French company already spent $2 billion on the acquisition of a 20% stake in India’s Adani Green Energy Ltd. this year.
The other priority in term of cash allocation will be maintaining a solid balance sheet and anchoring the net debt-to-capital ratio sustainably below 20%, Total said.
