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Total Adjusted Net Rises 36% on Record Crude Prices (Update1)

Bloomberg 

 

By Tara Patel

Nov. 5 (Bloomberg) – Total SA, Europe’s third-largest oil company, said third-quarter adjusted net profit advanced 36 percent as record crude prices made up for a drop in production.

Adjusted profit rose to 4.07 billion euros ($5.25 billion), or 1.81 euros a share, from 3.0 billion euros, or 1.32 euros a share, a year earlier, the Paris-based company said today in a statement. That was higher than the 3.85 billion-euro median estimate of analysts surveyed by Bloomberg News. Net income dropped to 3.05 billion euros from 3.12 billion euros a year earlier.

“The results are pretty impressive with good growth prospects,” said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh. Total’s lower output stemmed from a “significant impact from maintenance and outages that aren’t expected to continue,” he said.

Total dropped as much as 2.5 percent and was trading down 90 cents at 43.60 euros at 9:26 a.m. in Paris. It has declined 22 percent since the beginning of the year, compared with a 28 percent decline for the Dow Jones Europe Stoxx Oil & Gas index.

Investment Plans

Chief Executive Officer Christophe de Margerie has pledged to maintain investment plans amid a drop in demand. Total has said production growth in the next decade will come from deep- water fields in Africa, heavy-oil ventures in Canada and liquefied natural-gas projects. The company forecast its share of output from all projects at almost 3 million barrels of oil equivalent a day by 2016, based on a $100-a-barrel scenario, according to a presentation given in September.

Oil futures in New York averaged more than $118 a barrel in the quarter, up 57 percent from a year earlier. After reaching a record above $147 a barrel in July, oil tumbled more than $80 as growth in fuel demand slowed to the lowest rate in 15 years amid an economic slump.

“Total reaffirms its view of higher oil prices in the medium term to long term, supported by a tight supply-demand balance,” the Total statement said. Total will continue to develop the company and maintain dividend growth “even through a prolonged period of weakness in the environment.”

Total’s oil and gas production was 2.231 million barrels of oil equivalent a day in the quarter, compared with 2.352 million barrels a day in the year-earlier period and 2.353 million barrels in the previous quarter. European competitors Royal Dutch Shell Plc and BP Plc last week reported increases in dollar-denominated profit of 22 percent and 83 percent, respectively.

Angola Assets

The 5 percent drop in production was mainly due to unscheduled shutdowns on the Al Jurf field in Libya since May, 2008 and on the Bruce and Alwyn fields in the North Sea, the statement said.

The French company is counting on output from its Jura gas and condensate discovery off the northeastern coast of Scotland, which started in May, as well as the deep offshore Moho-Bilondo field in the Republic of Congo. Total has also said it expects greater production from an offshore block in Angola.

Total’s major asset in Angola is Block 17, at which it pumps about 500,000 barrels of oil a day from the Girassol and Dalia zones. The Paris-based company plans to start drilling next year at the block’s Pazflor deposit and begin production there in 2011. Total is also studying future output from nearby Clov and has called the deepwater Block 32 “the next big development” with plans for output in 2014.

Refinery Throughput

Should crude decline to $60 a barrel and remain there in the medium-term, de Margerie has said “a lot of projects would be delayed,” including “clean” tar sand developments, which would need at least $90 a barrel to be profitable.

Third quarter refinery throughput fell 3 percent compared to last year and rose 4 percent from the previous quarter in spite of shutdowns at the Port Arthurrefinery in the U.S. due to hurricanes.

“Turnaround activity scheduled for the fourth quarter 2008 is limited to partial shutdowns of the Feyzin and Provence refineries,” the statement said. The utilization rate based on crude was 89 percent in the latest period compared to 85 percent in the previous quarter.

The company said Oct. 15 third-quarter profit from producing gasoline, diesel and other fuels increased as crude prices dropped and hurricanes in the Gulf of Mexico halted refineries. Refining margins climbed to $45 a ton from $23.90 a year earlier, the Paris-based company said in a statement on its Web site. That was the highest since the fourth quarter of 2005.

Sanofi Stake

Of the 37 analysts tracked by Bloomberg who cover Total, 33 recommendbuying the shares, four advise holding the stock and one says “sell.”

Total said its plan to invest $18 billion this year “is progressing as planned” and it is pursuing “a policy of progressively divesting non-strategic holdings.”

Total sold shares in drugmaker Sanofi-Aventis SA in the third quarter. Asset sales in the period totaled 524 million euros, which reflected “essentially sales of Sanofi-Aventis shares,” the company said. De Margerie has said the oil company is seeking to gradually divest its holding in Sanofi and stock would be sold “on a regular basis.” Total owns 12.7 percent of Sanofi, according to data compiled by Bloomberg.

Total is getting rid of other assets that aren’t part of its oil business. In May 2006 it floated the Arkema chemicals unit, with a market value of 1.75 billion euros. De Margerie also said he plans to sell Total’s glove and condom-making unit, part of the Hutchinson rubber-processing division.

To contact the reporters on this story: Tara Patel in Paris attpatel2@bloomberg.net;

Last Updated: November 5, 2008 03:49 EST

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