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Total Profit Rises 13% on Higher Oil Prices Amid Output Drop

October 28, 2011

(Adds CFO comment from 10th paragraph.)

Oct. 28 (Bloomberg) -- Total SA, Europe’s third-largest oil producer, said profit rose 13 percent amid higher prices and improved refining results even as production dropped for the third straight quarter.

Excluding changes in inventories and the value of a stake in Sanofi-Aventis SA, third-quarter earnings climbed to 2.8 billion euros ($4 billion) from 2.48 billion euros a year earlier, the Paris-based company said today. That beat the 2.69 billion-euro average of 14 analysts surveyed by Bloomberg.

Adjusted net income for Total’s downstream division climbed 47 percent to 388 million euros as profits were buoyed by an “improved operational performance” in refining. Additional output from Russia failed to make up for lost Libyan production due to the uprising against Muammar Qaddafi.

Total’s downstream operating profit was “better than expected,” Jason Kenney, an analyst at Banco Santander SA, wrote in a report. Earnings at the exploration and production division were weighed down by lower output, he said.

Brent crude futures, the benchmark for two-thirds of the world’s oil, jumped 46 percent from the year-earlier quarter to average $112.09 a barrel. Royal Dutch Shell Plc said yesterday that earnings doubled to $7 billion, while Exxon Mobil Corp. reported net income exceeded $10 billion for a third consecutive quarter.

Total fell 1.9 percent to 38.375 euros as of the close of trading in Paris. The stock is down 3.2 percent this year.

‘Slightly Improved’

Earnings benefited from more favorable conditions for “supply optimization,” Total said today. “Refining margins are slightly improved.”

Production fell 0.9 percent to 2.319 million barrels of oil equivalent a day. Chief Executive Officer Christophe de Margerie had forecast output would be little changed this year because of a lull in startups.

Total raised a target for production growth in September and said it will drill twice as many frontier exploration wells in a bid to make big discoveries. The French company expects output to rise an average of 2.5 percent a year from 2012 to 2015, driven by projects in Angola and Nigeria. Total has said it may raise investment to about $23 billion a year from about $21 billion to pay for new ventures.

‘Partially Offset’

“We are very confident about our outlook for 2012 production growth above 3 percent,” Chief Financial Officer Patrick de la Chevardiere said on a conference call. Output will come from Pazflor in Angola, which is currently producing at a rate of 120,000 barrels a day, Trinidad and the Islay gas field in the North Sea.

“The production ramp-up of the Pazflor field in Angola and the progressive recovery of production in Libya are expected to be partially offset by turnarounds at Snovhit and Yemen LNG” in the fourth quarter, according to today’s statement.

Total has said the acquisition of a 12 percent stake in OAO Novatek will add about 120,000 barrels equivalent a day in output while the Pazflor project in Angola is being ramped up to full capacity of 220,000 barrels a day. The Usan project in Nigeria will start in the first quarter while Angola LNG could begin in the first half of 2012, according to de la Chevardiere.

Throughput dropped 7 percent in the third-quarter due to the sale of Total’s interest in Cepsa and higher turnarounds in Antwerp and Port Arthur.

Australia, Nigeria

In a bid to boost future oil and natural gas production, Total said it plans to make final investment decisions “in the coming months” on the Ichthys LNG project off Australia, Egina and Ofon 2 in Nigeria and Tempa Rossa in Italy.

“Launching the Shtokman project in Russia remains contingent on an improvement in the fiscal regime and the agreement of the partners,” Total said.

The oil company pledged to explore more aggressively for oil and gas. It reversed a production slump that touched a nine- year low in 2009 by starting new fields and LNG projects. The company plans to drill about five frontier exploration wells this year and the same number in 2012, more than twice last year’s count.

“This has already been an outstanding year for exploration,” de la Chevardiere said, citing finds in Azerbaijan, French Guiana and Norway.

Drilling is ongoing at the Brunei deepwater Block CA-1, an “elephant-size” oil prospect that could open a new deep offshore basin, Total has said. A new producing field could also be started at Malaysia’s offshore Saujana-1 where drilling will also start as well as in Argentina.

For these regions, Total “should have the results in the coming months,” he said.

--Editors: Stephen Cunningham, Randall Hackley.

To contact the reporter on this story: Tara Patel in Paris at

To contact the editor responsible for this story: Will Kennedy at

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