French oil giant Total SA (TOT) on Thursday reported net profit of $2 billion in the second quarter and a significant increase in cash flow, signaling the company is continuing to look at new investment opportunities despite ongoing oil price pressure.
The company's net profit for the quarter was steady compared with a year earlier, but its debt levels continued to come down and cash flow from operations soared 60% to generate enough firepower to cover capital spending for the quarter.
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The confident tone reflects a years-long campaign to bring down costs across the business in response to intense pressure from a dramatic slump in oil markets. Over the last three years the price of crude has plummeted from $114 to $27 a barrel before rebounding to their current level of around $50 a barrel, pummeling profit across the sector.
Oil companies' cash generation has become a core focus for analysts and investors anxious about ballooning debt levels and dividend security in the wake of the oil price crash. In response companies have worked hard to bring down the oil price at which they will make enough cash to cover capital spending and dividend payouts. Total is targeting a break even oil price of $50 a barrel this year.
In addition to its cost cutting efforts, Total's performance in the quarter was buoyed by a 3% increase in production, particularly from high margin projects that grew their output over the course of the period. The company is targeting production growth of more than 4% this year.
The results signaled are among the first reported by the oil sector for the second quarter and suggest the company is continuing to recover and adapt to a lower oil price environment and is ready to take advantage of lower costs with new acquisitions and projects.
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(END) Dow Jones Newswires
July 27, 2017 02:14 ET (06:14 GMT)