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Reuters: Total shares hit new high on profit, output hopes: switch out of Royal Dutch Shell into Total

Fri Jun 15, 2007 2:22 PM BST
By Marie Maitre

PARIS (Reuters) – Total shares set a record high on Friday as a weaker euro and hopes for strong 2007 profits and production volumes lured investors back into a stock that has underperformed energy peers so far this year.

Shares in the French oil and gas giant were up 1.5 percent at 1300 GMT, bringing its rise to 6 percent over the past four days, nearly twice the gains clocked by rival majors Exxon Mobil and Royal Dutch Shell during the same period.

The past four sessions have helped lift to 7 percent Total’s share advance since the start of the year, a performance that still lags Exxon and Shell, whose stocks have both gained nearly 11 percent in the first half of 2007.

“Total has been a bit of a laggard versus its peers, and in Europe Royal Dutch has been a very strong performer. I think we may be seeing a bit of switching out of Royal Dutch into Total now,” said Lehman Brothers analyst Lucy Haskins.

Total shares are benefiting from both a share valuation catch-up and the prospect of positive news on its oil and gas output when the energy giant posts second-quarter results on August 2, said Haskins, who rates the stock at “overweight.”
“There is an anticipation that at the Q2 stage, they (Total) should show top-line volume growth. We haven’t seen volume growth for a while from that company, so people might also be seeing that as a good ticker,” Haskins added.

Total, the world’s fourth-largest oil group by market value, has forecast output growth of more than 5 percent on average between 2006 and 2010 as new projects such as Angolan oil field Rosa and Qatari gas field Dolphin start producing.

This forecast compares to growth targets of 1 to 2 percent at larger rivals Royal Dutch Shell and BP.

Last week investment bank UBS raised its price target on Total to 67 euros from 61 previously, saying the French major was “about to embark upon a significant growth spurt with imminent project start-ups”.

Analyst Antoine Leurent at KBC Securities said, “There is a better volume effect at Total than at rival companies,” although adding that energy stocks in general were back in favor with investors on the prospects of solid 2007 earnings.

“Investors are only starting to realize now that 2007 could be, after all, an even better year than 2006. That’s what high oil prices and refining margins are pointing at,” he said.

A 2.7 percent rebound in the dollar against the euro since the end of April should add to the earnings momentum of companies such as Total, which earn dollars but report in the euro zone single currency, Leurent said.

© Reuters 2007. All rights reserved.

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