Total Becomes Latest Big Oil Firm to Reward Investors -- 3rd Update

02/08/18 01:50 PM EST
By Sarah Kent 

LONDON -- Big oil companies are rewarding investors again, using boosted profits from the fragile crude-market recovery to shower shareholders with larger dividends and stock buyback programs.

French oil giant Total SA said Thursday it would raise its dividend by 10% over the next three years and buy back up to $5 billion-worth of shares in the latest sign of confidence in the industry.

Chevron Corp., Statoil ASA, Anadarko Petroleum Corp. and ConocoPhillips have all announced higher investor payouts this year. Those moves followed British oil giant BP PLC's announcement of a new share-buyback program in October.

Buying back existing stock generally makes the remaining shares more valuable. The companies are rewarding shareholders first and promising to maintain current spending levels as profits return to the industry after a three-year slump in oil prices.

The oil-price crash had forced some companies, including Total, to offer investors the option to take their dividend in shares as a way to preserve cash. Other firms, like Conoco and Italian oil titan Eni SpA, cut the payouts to weather the downturn.

Now, higher oil prices -- coupled with the industry's painful, yearslong efforts to cut costs -- are providing support for dividends and buybacks.

Brent crude, the international benchmark, was down 0.9% Thursday afternoon in London at $64.92, its lowest level since December but still over double the price at the market's trough in the winter of 2016.

Total's announcement Thursday came as the company reported a 86% rise in net profit for the fourth-quarter compared with the prior year. Full-year earnings rose 39%, boosted by rising crude prices and growing oil and gas production.

Total has "the confidence to be bold and give shareholders a real prize today," said analysts at Bernstein. "2018 will be the year of higher-than-expected cash returns."

Shares in Total closed up 0.7%, on a day when most of its rivals' stocks fell.

The company capped off a set of mixed results for the world's biggest oil companies. Rivals Exxon Mobil Corp. and Chevron both increased profits in the fourth quarter but missed expectations, sending their share prices down. Royal Dutch Shell's profits tripled, but its cash flow disappointed. BP suffered almost $2.7 billion in one-time charges, marring an otherwise healthy set of profits.

The patchy earnings highlight the challenges that still plague the sector, even as profits rise. The industry is wary of the possibility of prices falling again, with many companies vowing to maintain spending discipline and use excess cash to reduce debt and return value to shareholders.

The oil market has underscored those fears in the past two weeks, falling from levels over $70 a barrel reached late in January.

"Our expectation is that some of this recent strength could be short lived, and then prices will moderate over the medium term," BP Chief Executive Bob Dudley told analysts Tuesday.

Still, Chevron said it would boost its quarterly dividend by 4% and signaled that more cash returns could be on the way if oil prices remain around current levels. Shell has outlined plans to start a $25 billion share-buyback program by the end of the decade.

On Wednesday, Norway's Statoil said it would increase its fourth-quarter dividend by 4.5%, as the state oil company returned to profit and said it could generate positive free cash flow, even with oil prices below $50 a barrel.

Stronger financial performance also encouraged the U.S.'s Anadarko Petroleum Corp. and ConocoPhillips to increase their quarterly shareholder payouts and raise the size of their share buyback programs. Both companies reduced their dividends during the worst of the oil price crash.

Write to Sarah Kent at sarah.kent@wsj.com

 

(END) Dow Jones Newswires

February 08, 2018 13:50 ET (18:50 GMT)

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