Total’s (TOT) forward PE ratio is 9.3x, below peers’ average of 12.1x. Royal Dutch Shell’s (RDS.A), Petrobras’s (PBR), and ENI’s (E) PE ratios are also below the average, at 10.7x, 9.9x, and 9.1x, respectively. Contrarily, ExxonMobil’s (XOM), Chevron’s (CVX), and Suncor Energy’s (SU) PE ratios are above the average, at 16.3x, 15.1x, and 12.0x.
Total’s forward EV-to-EBITDA ratio of 4.5x is also below the peer average of 4.7x. ExxonMobil’s and Chevron’s forward EV-to-EBITDA ratios are above the average, at 6.9x and 6.0x, respectively.
What Total’s valuation implies
Total’s discount to peers may be due to its weak first-quarter earnings. In the first quarter, Total’s adjusted earnings fell 4% YoY (year-over-year) to $2.8 billion. Its adjusted net operating earnings fell in its E&P (exploration and production) and marketing segments. However, its integrated GRP (gas, renewables, and power) and refining earnings rose YoY.
Total’s upstream performance was robust in the first quarter. The company’s hydrocarbon production rose 9% YoY to 2.95 million barrels of oil equivalent per day, and key projects at Kaombo, Angola, and Egina, Nigeria, began production. Total’s upstream volumes are expected to grow by 9% this year, driven by ramp-ups and start-ups, and the company made two important discoveries in the first quarter. It strengthened its foothold in the global LNG (liquefied natural gas) industry with its entry into the Arctic LNG 2 project, an agreement for the Papua LNG project, and investment in the Driftwood LNG project in the US. If Total’s upstream volumes grow, its valuation could improve.