By Francois de Beaupuy on 2/9/2021
PARIS (Bloomberg) –Total SE bucked the trend of a disappointing fourth quarter for Big Oil, reporting earnings that exceeded expectations and pledging more cash for cleaner energy.
The results show once again how the French giant has outperformed its peers throughout the downturn caused by the coronavirus pandemic. As its more heavily indebted rivals have stumbled, Total’s lower costs and stronger cash flow allowed it to preserve its dividend and lead the way on investments in clean energy.
“The real reason of the resilience of Total,” said Chief Executive Officer Patrick Pouyanne, “is the quality of the portfolio that we built.”
The company can cover its investments and dividend at current oil prices, while pivoting to cleaner energy, he said. More than a $2.4 billion of its planned net investments of $12 billion this year will go into renewables and electricity. That’s an increase of about 20% from 2020.
In a gesture toward the growing importance of cleaner energy, the company proposed changing its name to TotalEnergies and become the first company that will only sell bonds linked to sustainability targets.
Shares of the company fell 1.8% to 35.57 euros in Paris.
Total’s fourth-quarter adjusted net income was $1.3 billion, down 59% from a year earlier but above the average analyst estimate of $1.14 billion.
Cash flow was $4.9 billion, down 33% from a year earlier. Oil rose above $60 a barrel in London this week to a one-year high, and at current prices “we generate enough cash flow to cover our investments and dividend,” Pouyanne said.
Total’s rising investments in clean energy will allow gross installed capacity in renewables to climb from 7 gigawatts last year to 10 gigawatts in 2021 and 35 gigawatts in 2025.
After a batch of recent clean-energy deals in countries such as India, Total is unlikely to make more large acquisitions of already-built renewables assets because they are expensive, Pouyanne said.
Big Oil’s fourth-quarter earnings have mostly brought unpleasant surprises. Investors had been expecting a tailwind after crude recovered from last year’s historic lows. But with Covid-19 lockdowns still depressing fuel sales and refining margins, most of the industry was still playing defense, rather than taking advantage of a more favorable market.
Total wasn’t immune to the crisis, reporting lower fourth-quarter earnings in all divisions, from exploration and production, to refining and chemicals, and gas and power.
Yet in crucial metrics, notably gearing, Total was well ahead of its peers. The company’s ratio of net-debt to equity was to 21.7% at the end of December, compared with above 30% for some of its European rivals.
“In a quarter of volatile results and disappointing cash flow for the supermajors, Total delivers a good set of numbers,” analysts at Jefferies said in a note.