Total lifts dividend, plans growth as profits beat estimates

Total raised its dividend by 1.6% and said it may give the go-ahead for almost a dozen new projects in the next 18 months after fourth-quarter profit beat analysts’ estimates.

"We’re going to propose to increase the dividend as we have confidence in the future," chief executive officer Patrick Pouyanne told reporters in Paris.

"My goal is to launch new projects to prepare the future, while remaining disciplined and cutting costs further because crude prices might drift lower."

Total’s confident appraisal of the year ahead belied what was otherwise a difficult fourth quarter for major oil companies.

The French producer’s peers BP, Royal Dutch Shell and Exxon Mobil Corporation all fell short of analysts' estimates as rising profits from oil and gas production failed to fully offset weaker earnings from refining and trading.

Total’s adjusted net income climbed 16% from a year earlier to $2.41bn due to rising oil and gas production and cost cuts, the company based in Courbevoie near Paris said on Thursday.

Analysts polled by Bloomberg had expected a profit of $2.23bn.

"We view this as a solid release, with a small beat to consensus, further cost-reduction targets and a small hike in dividend signalling management confidence," Goldman Sachs Group analysts wrote in a note.

Total shares gained as much as 2% and were up 0.6% at 47.10 euros as of 11:22 in Paris. The stock has climbed 28% in the past 12 months.

Funding dividend

Adjusted net operating income jumped 51% from a year earlier to $1.13bn in Total’s exploration and production business, and rose 13% to $1.14bn in the refining and chemicals division.

After writing down the value of gas assets in Australia, Angola and the UK due to falling oil and gas prices, Total reported net income of $548m compared with a loss of $1.63bn a year earlier.

The company said it would raise its quarterly dividend by 1 cent to €62 cents, the first increase in three years, while maintaining the option for shareholders to be paid with new Total shares.

It said it should be able to fund operations and the cash part of its dividend without needing to borrow with crude at about $50 a barrel this year - $5 lower than both its September estimate and the current price of Brent crude.

Exxon and Shell both said in the past week that cash flow covers their spending and dividends at current oil prices, while the UK’s BP needs Brent to rise to $60 a barrel this year to achieve that goal.

Investment decisions

The price rebound and lower drilling costs have encouraged Total to sign preliminary deals to produce gas in Iran and invest in oil projects from Brazil to Uganda.

The final go-ahead for Iran’s South Pars 11 project may be made "before the summer" if the US doesn’t impose new sanctions on Iran, the CEO said. The Libra 1 project in Brazil may also be approved within a similar time frame, Pouyanne said.

The company said it plans to make final investment decisions on 10 oil and gas production projects in the next 18 months, in countries including Nigeria, Angola, Azerbaijan and Argentina.

It also expects to decide on a petrochemical project at Port Arthur in the US this year. Total reiterated its plan to boost oil and gas production by 5% a year from 2014 to 2020.

The company also said that:

*Output increased by 4.7% in the fourth quarter from a year earlier to 2.462 million barrels of oil equivalent a day; volumes will rise by more than 4% this year

*Operating costs were cut by $2.8bn last year compared with 2014

*Targeted savings to climb to $3.5bn in 2017 and $4bn in 2018

*Organic investments including resource renewal will be between $16bn and $17bn in 2017, down from $18.3bn in 2016

*Net debt rose to $27.1bn at the end of 2016 from $26.6bn a year earlier.

*It may divest as much as $2bn of pipelines and small fields this year after completing the $3.2bn sale of its Atotech unit last month.