Total Profit Rises 35% on Higher Oil Prices Amid Output Drop
April 29, 2011, 12:49 PM EDTBy Tara Patel
(Updates with comments from CFO from fifth paragraph.)
April 29 (Bloomberg) -- Total SA, Europe’s third-largest oil producer, reported first-quarter profit climbed 35 percent as higher crude prices offset a drop in production partly due to the conflict in Libya.
Profit excluding changes in inventories and the value of a stake in Sanofi-Aventis SA rose to 3.1 billion euros ($4.6 billion) from 2.3 billion euros a year earlier, the Paris-based company said today. That beat the 3 billion-euro average in a Bloomberg survey of analysts. Net income rose 51 percent to 3.95 billion euros.
“It’s a solid set of results,” Bertrand Hodee, an analyst at Kepler Capital Markets who rates the shares “hold,” said in an e-mail. “Total is clearly taking the right steps to regain medium-term investor confidence but delivery is too far away.”
Total joins other European energy producers in reporting higher earnings on the back of rising oil prices. Royal Dutch Shell Plc said yesterday that profit rose 30 percent, as the price of Brent averaged $105.52 a barrel in the first quarter, 36 percent more than a year earlier. Total announced yesterday an agreement to buy as much as 60 percent of the second-largest U.S. solar panel maker SunPower Corp. for $1.38 billion.
Total may raise investment over the next few years to about $23 billion annually from about $20 billion to pay for new oil and natural gas projects, according to Chief Financial Officer Patrick de la Chevardiere.
Output Drop
The company’s first-quarter production fell 2 percent to 2.37 million barrels of oil equivalent a day from a year earlier. Libyan production of about 55,000 barrels a day was halted in March and while output also fell due to price effects.
The shares rose 0.5 percent to 43.22 euros in Paris, giving the company a market value of 101.6 billion euros. The stock is up 6.5 percent this year.
The company said in February it expected output to be little changed this year because of a lull in startups and has pledged to explore more aggressively for oil and gas. The company reversed a production slump that touched a nine-year low in 2009 by starting new fields and liquefied natural gas projects, and has forecast average output growth of 2 percent a year through 2015. The French company is expecting to start production at the Pazflor field in Angola in the fourth quarter.
SunPower
“Total is actively managing its portfolio, orienting it mainly toward the upstream,” Chief Executive Officer Christophe de Margerie said in the earnings statement. This includes more emphasis on “new energies” and asset sales expected to be worth about $10 billion this year.
Total’s agreement to buy a stake in SunPower boosts its operations in renewable energy. This follows a deal in February to sell a 49 percent stake in Spanish refiner Cia. Espanola de Petroleos SA for 3.7 billion euros. Total is in talks to sell its Lindsey refinery in the U.K. after shutting a French plant last year.
The company agreed to buy about 12 percent in Russia’s OAO Novatek for about $4 billion at a ceremony last month attended by Prime Minister Vladimir Putin. In March, it bought a stake in Ugandan exploration blocks with China National Offshore Oil Corp. from Tullow Oil Plc, paving the way for the development of the Lake Albert Basin. Total has also acquired a stake in Australia’s Gladstone LNG venture and stakes in oil-sands developments in Canada.
Dividend Boost
The company plans to make final investment decisions on the Ichthys LNG project off Australia, Egina in Nigeria and Shtokman in Russia’s Arctic by the end of the year, de la Chevardiere said today.
Total’s dividends and debt level can be maintained with higher annual spending on new projects, he said.
“If we made some acquisition, we could sell some assets,” to keep investment spending between $20 billion and $23 billion, he said, adding that the oil company has “room to increase” its dividend payout because it is based on oil prices at $80 a barrel.
“We need more time to see how oil prices will stabilize so that we could make a decision to propose to the board to increase the dividend,” he said.
--with assistance by Stephen Cunningham in London, Editors: Jonas Bergman, Randall Hackley, Vidya Root.
To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
