Second-quarter 2013: Total profits dip despite output rise

Second-quarter profits dipped 3 percent even as the company reported the first output rise in three years. The Paris-based company, Europe’s third-largest oil company by production, said that adjusted net income between April and June was €2.7bn compared with €2.79bn during the same period last year – that was in line with the 2.65 billion-euro average estimate of 14 analysts surveyed by Bloomberg.

Production advanced 1.3 percent to 2.29 million barrels of oil equivalent a day after Total resumed output at the North Sea Elgin platform and security improved in Yemen. The effect of higher volumes was offset by sliding Brent crude prices, which averaged $103.35 a barrel in the quarter, 5 percent lower than a year earlier as economic stagnation curbed demand. “Results were better than expected in every division,” Bertrand Hodee, an analyst at Raymond James who has an outperform rating on the shares, wrote in a note. “Production growth was symbolic this quarter but it marked a clear inflection point.” Chief Executive Officer Christophe de Margerie has pledged to boost production, targeting average annual growth of 3 percent from 2011 to 2015 even after losing volumes the past two years. The second-quarter output increase was the first year-on-year gain since the last three months of 2010. Total has promised to explore more aggressively for discoveries, with plans for more than 60 wells this year.

The Elgin platform was shut for almost a year following a natural-gas leak in March 2012. Output resumed March 9 at about half capacity, and will return to prior levels by 2015 with the addition of new wells. Elsewhere, Total plans to start five fields this year, including in China, Kazakhstan and Angola. De Margerie has promised output growth of 2 percent to 3 percent this year, a goal that could be modified in September depending on production prospects from Kashagan, Angola LNG, the OML 58 upgrade and Nigeria, where theft and sabotage have hit onshore installations, Chief Financial Officer Patrick de la Chevardiere said on a conference call.

In addition to starting new development projects including Moho Nord in Congo and Egina in Nigeria, Total said today it is “studying” pushing ahead with Yamal LNG in Russia and the Fort Hills mining project in Canada before the end of the year. “We are entering an unprecedented period of startups over the next four years,” de la Chevardiere said. Total is “on schedule” for starting Clov in Angola, Ekofisk in Norway and Laggan-Tormore off the Shetland Islands next year. As Total develops so-called mega-projects, de Margerie is also carrying out a series of asset sales to help pay for them. “The group is confident in its ability to achieve its target of $15 billion to $20 billion in asset sales between 2012 and 2014,” it said. The sales will continue in 2015 and beyond to improve the explorer’s portfolio, de la Chevardiere said.

Total’s European refining margin, or the profit from turning crude into fuels, dropped to $24.10 a ton in the quarter from $38.20 a ton a year earlier. “The downstream reaped the initial benefits of the restructuring program even though further changes are still necessary to strengthen our position,” de Margerie said in a statement. The petrochemicals environment was “stable” in Europe and “slightly” improved in the U.S. while the Satorp crude-processing plant at Jubail in Saudi Arabia should be commissioned by the end of 2013.

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