Why Total SA (ADR) (TOT) Earnings Aren’t Climbing With Oil Prices

Page 1 of 2

Total SA (ADR) (NYSE:TOT)Total SA (ADR) (NYSE:TOT) will release its quarterly report tomorrow, and investors have gotten a bit more upbeat about the prospects for the French oil company’s stock. Yet from an income perspective, Total SA (ADR) (NYSE:TOT) earnings aren’t poised to deliver the growth that you’d expect in light of relatively strong price action in the oil market in recent months.

One thing that U.S. investors often forget is that the world energy markets are much different from what we’ve seen domestically in recent years. While the U.S. is awash in oil and natural gas, prices for crude oil and refined products remain relatively high overseas. Moreover, with the European economic crisis, Total SA (ADR) (NYSE:TOT) has had to face a harsh investing environment. Let’s take an early look at what’s been happening with Total SA (ADR) (NYSE:TOT) over the past quarter and what we’re likely to see in its quarterly report.

Stats on Total

Analyst EPS Estimate $1.57
Change From Year-Ago EPS (3.1%)
Revenue Estimate $58.48 billion
Change From Year-Ago Revenue (7.2%)
Earnings Beats in Past 4 Quarters 2

Source: Yahoo! Finance.

How will Total earnings fare this quarter?
Analysts have been downbeat about Total SA (ADR) (NYSE:TOT)’s earnings prospects in recent months, cutting their June-quarter estimates by $0.13 per share and marking down their full-year 2013 consensus by 7%. Yet the stock has performed quite well, rebounding 15% since late April.

Few American investors know much about Total SA (ADR) (NYSE:TOT), but the company ranks among the largest oil companies in the world. Unfortunately for investors, its headquarters in the middle of Europe left its stock exposed to the full wrath of the European financial crisis, and that’s a big part of why the company’s stock has languished even as oil majors in the U.S. and elsewhere in the world have gained a lot more ground.

Yet Total has been positioning itself to take advantage of some of the most promising prospects in energy production around the world. In Africa, Total holds a substantial stake in lucrative blocks off the shore of Angola, and it also has added a presence off the coast of Nigeria, for which it recently spent $1.2 billion to buy subsea equipment from FMC Technologies, Inc. (NYSE:FTI) to support its new operations in the Egina offshore field.

At the same time, though, Total has been smart about not wasting its financial resources. It sold off its minority stake in one major venture in the Canadian oil sands to partner Suncor Energy Inc. (USA) (NYSE:SU) in May, taking a $1.65 billion charge but saving $5 billion in prospective costs. Suncor Energy Inc. (USA) (NYSE:SU) also abandoned the Voyageur project, validating Total’s decision.

Page 1 of 2