Europe’s Oil Majors Leave Pandemic Blues Behind

By Shadia Nasralla

Last year’s demand collapse forced BP, Royal Dutch Shell and Equinor to slash their dividends and preserve cash as they to try to transform themselves into companies that can thrive in a low-carbon world.

With benchmark oil prices recovering from an April 2020 low of $16 a barrel to about $67 a barrel this month, most of the companies managed to drive profits back above levels seen before the coronavirus pandemic first struck.

BP’s first-quarter headline profit figure of $2.6 billion exceeded its first-quarter profit of $2.4 billion in 2019 and was more than 200% higher than in 2020.

France’s Total reported headline profits of $3 billion in the first three months of 2021, up 69% from last year and 9% above the first quarter of 2019.

Norway’s Equinor, meanwhile, came in with a first-quarter profit of $5.5 billion on Thursday, also exceeding its pre-pandemic profit of $4.2 billion.

Shell’s first-quarter profit climbed 13% from last year to $3.2 billion though that was still below 2019’s $5.3 billion.

But despite recovering profits, payouts were still below pre-pandemic levels with the exception of Total, which had kept its dividend steady throughout the pandemic.

“(Total’s) dividends are held flat but the buyback question will now arise given the sub 20% gearing (debt-to-equity ratio),” Bernstein analysts said.

While Shell has increased its dividend twice in the past six months, the 17.35 cents it paid per share in the first quarter was below the 47 cents it paid out before the pandemic.

Shell, which is set to increase its dividend by 4% next year, has flagged share buybacks once its debt falls to $65 billion which Barclays and Bernstein say is possible this year.

Equinor also raised its payout to 15 cents per share, but again this was short of 2019’s 26 cents per share.

“The suggestion is that capital is being preserved to allow for an acceleration of new energy investment,” Citi said.

BP’s 3.8 pence per share first-quarter dividend was about half of what it paid in 2019. However, it is starting share buybacks which analysts expect to increase in the third quarter.

“BP should be able to buy back at least $10 billion between 2021 and 2025,” said analysts at Jefferies.

Spain’s Repsol reported a 5.4% rise in first-quarter adjusted net profit to 471 million euros, though this was 24% below earnings in the first three months of 2019.

It decided in November to cut its 2021 and 2022 cash payouts to 0.60 euro from 1 euro per share, but said share buybacks could push returns above 1 euro per share by 2025.

(Reporting by Shadia Nasralla; Additional reporting by Nerijus Adomaitis, Isla Binnie and Benjamin Mallet; Editing by David Clarke and Elaine Hardcastle)

Total Back to Pre-Pandemic Profit Levels as Oil Prices Rise

By Benjamin Mallet

The company, which is branching into renewable energy and diversifying away from hydrocarbon-centred activities, benefited from this drive as areas like oil refining suffered.

Total reported an adjusted net income of $3 billion for January-March, up 69% year-on-year, and 9% above first-quarter 2019 levels.

This was despite a drop in hydrocarbon production of 7% from a year earlier, to 2.863 million barrels of oil equivalent per day (boepd).

Oil prices plummeted with the start of coronavirus lockdowns early in 2020 that brought travel to a standstill and crushed fuel demand, pushing companies like Total to cut investments and find cost savings.

Recovering prices are now boosting earnings at Total and peers like Britain’s BP, as accelerating COVID-19 vaccination programmes also raise prospects for sustained demand, although lockdowns remain in place in some of Europe.

Total cautioned the oil environment remained “volatile and dependent on the global demand recovery.”

It said it expected hydrocarbon production to remain stable this year compared to 2020 levels.

Like some peers, Total is also benefiting from a booming natural gas business.

RENEWABLES PUSH

The group, which is set to rebrand itself as TotalEnergies, said it was eyeing $12-$13 billion in investments this year, with half of that going to maintaining activities and the rest for growth, including to further its push into renewable energy.

The company has already racked up purchases in the renewable energy sector this year, including solar projects in the United States, and a stake in India’s Adani Green Energy Limited (AGEL) and its solar power assets for $2.5 billion.

Its portfolio of renewable power generation capacity to 2025, including installed sites and those in development and construction, is now 28 gigawatts (GW) on a net basis, up from 17.9 GW in the fourth quarter of 2020.

Total said it expected to generate some $24 billion in debt-adjusted cash flow in 2021, based on hydrocarbon prices remaining at first-quarter levels, with Brent crude at $60 a barrel, and European refining margins of $10-$15 per tonne.

The group maintained a stable interim dividend of 0.66 euros per share against first quarter earnings.

Total declared force majeure on its $20 billion liquefied natural gas project in Mozambique earlier this week following insurgent attacks last month. It gave no immediate update on Thursday and is due to hold a call with analysts at 1130 GMT.

(Reporting by Benjamin Mallet and Sarah White. Editing by Marguerita Choy and Mark Potter)

Total Makes Big Offshore Oil Discovery in South Africa

Total, a French oil company, has made their biggest offshore oil discovery in South Africa after a successful natural gas drill in cape coast. According to the company the discovery was made on Block 11B/12B located 180 kilometers of the country’s southern coast. It also estimates that the reservoir may hold between 500 million and 1 Billion barrels of oil, enough to supply the country’s refineries for the next four years.

Resuming operations and overcoming harsh conditions

The French oil giant maintains a 45% stake in the shared exploration field 11B/12B, popular for its harsh conditions. While it has maintained control of the exploration areas for decades, the company stopped drilling operations in 2014 citing harsh off-shore conditions that are characterized by huge waves. It would, however, resume operations after importing a rig from Norway that proved effective in finding deep sea reserves.

While making the announcement, Total’s Vice President for exploration, Kevin McLachlan, mentioned that the discovery puts the company and country on the list of major gas and oil players in the world. Moving forward, he mentioned that the company would continue to conduct several tests as a follow up of the block’s prospects. He further added that the oil giant plans to acquire 3D seismic data and drill up to four exploration wells before year-end.

Increased rush for the Block

The discovery might see a spike in the number of exploration companies interested in the block as well as increased rush by current players. These include Qatar Petroleum Company, CNR International, and South Africa’s Main Street Consortium that hold 25%, 20%, and 10% stake in the said block respectively.

While most of these companies were hoping for this discovery, experts believe it is a game-changer for South Africa. The CEO of the country’s Oil & Gas Alliance, Niall Kramer, still considers the discovery a catalytic find. Kramer’s remarks were a response to Woodmac research company’s data that considers the newly-discovered reservoirs to be three times larger than any other gas exploration in the country to date.

Reprieve for the government

The gas discovery and prospects of the exploration of more reserves offers a reprieve to the government in its effort to boost its ailing economy. While assuming office, the country’s President, Cyril Ramaphosa, promised to attract over $100 billion in foreign investment that would go towards reviving the country’s economy. More importantly, rapid monetization of the reserves will go a long way toward unburdening the country’s energy supply, which has for the longest time relied on coal and the expensive diesel-powered turbines.

More Prospects

The block 11B/12B, in which Total discovered the natural gas reserve, covers up to 19,000 square kilometers. With a large portion of this area remaining unexplored, primarily due to the harsh conditions around the Cape coast, multi-national explorers operating in the region, as well as the government, remain hopeful. Total Oil that established its presence in the country in 1954 has already announced their plan of following up on more prospects that it believes will lead them towards even larger reserves.