Total Profits Plunge in Q4 on All-Round Weakness: Update
(Adds comments from conference)
French oil major Total recorded a 59% year-on-year fall in adjusted net profit in the fourth quarter to $1.3bn, according to company results published on February 9, owing to weaker numbers across all its business segments.
The company's adjusted net operating income came to $1.82bn, down 53% yr/yr, as upstream earnings nearly halved to $1.07bn on weaker oil and gas prices and a 9% cut in production. Integrated gas, renewables and power income slumped 68% to $254mn, while refining and chemicals earnings dropped 71% to $170mn and those from marketing and services by 30% to $332mn.
Total's performance improved quarter on quarter, though, with upstream earnings rising by a third, and refining and chemicals swinging back to profit from a $88mn loss in Q3 2020. But integrated gas, renewables and power profit was still down 11%, while income from marketing and services was down 28%.
Full-year net income was $4.06bn, down two thirds from 2019. Total cut capital expenditure by 26% to $13bn in the year and made $1.1bn in cost savings, bringing its organic gas break-even price to $26/barrel. But the company took on $10bn in impairment charges, mostly relating to the write-down of its oil sands assets in Canada after cutting its long-term price outlook in July.
Total's gearing stood at 21.7% at the end of 2020. The company's board has proposed a final dividend of €0.66 ($0.80)/share for Q4 2020, in line with the level in the three previous quarters.
The company attributed the quarterly gains to higher oil prices on the back of Opec+ cuts, and a sharp rise in gas prices in Europe and Asia as a result of cold weather. But refining margins remained depressed, amid low demand and large inventories. Cash flow from operations was relatively strong, totalling $5.67bn in Q4 2020, down 14% yr/yr but up 30% on the quarter.
Company rebrand
CEO Patrick Pouyanne told an online conference for analysts that the company was rebranding itself as TotalEnergies. This will be emphasised by the shift in energy output calculations, from the conventional barrels of oil equivalent/day to petajoules/day to include electrons. He said the company would continue to grow its output along with rising world energy demand. The name will be put to the vote May 28 and will take effect then and there, if it is approved.
Changing the company name "is the best way to establish the long-term valuation of the company," he said: renewable energy will rise up the company's list of priorities, although natural gas is still expected to be no less than half the total output for years ahead.
Pouyanne said there was the risk of an oil supply crunch in the near term as so many projects had been postponed and fields are depleting. That suggests a stronger oil price than today, but he said that even $50/barrel will give $6bn cashflow from all its revenue streams together: upstream, refining and marketing, renewables and integrated gas. In February the price of dated Brent had reached $60/b.
He did not mention gas from the Suriname-Guyana basin, although gas is there and Total is active in exploration. Total is working with ExxonMobil defining the extent of Block 58 in Suriname, which Total has operated since January. "We have potentially a new jewel, oil, for the group," he said. The company has not replied to NGW requests for comment on its plans, if any, to commercialise the large gas resources.
Regarding Qatar, and its earlier announced search for partners for its North Field East expansion project, he said: "For me, at the end, it is a matter of risk and reward, We have a strong history in Qatar but it is not a matter of emotion." The cost of production and efficiency are in its favour, he said. Qatar awarded some more key contracts February 8.
He said that in Mozambique, operations were continuing offshore, and that there was so far no change to the first LNG cargo of 2024. But there are still security problems onshore, even if these have not so far impacted the "logistical operations."