Bloomberg News

Total Pledges 2013 Production Growth After Profit Rises 13%

February 13, 2013

Total SA, Europe’s third-largest oil producer, expects production to increase as much as 3 percent this year after reporting a 13 percent rise in 2012 profit on an improved refining performance.

Profit excluding changes in inventories advanced to 3.1 billion euros ($4.2 billion) in the fourth quarter from 2.7 billion euros a year earlier, the Paris-based company said today in a statement. That compares with the 3 billion-euro average estimate of 11 analysts surveyed by Bloomberg.

“The company continues to improve visibility on production growth,” Bernstein Research analysts including Oswald Clint wrote in a note.

Chief Executive Officer Christophe de Margerie has pledged to raise production from new fields and explore more aggressively for reserves to revive output growth. He has also focused on selling assets such as Total’s pipeline network in south western France as part of a plan to raise as much as $20 billion. Total sold $6 billion of assets last year and expects to reach $15 billion at the end of 2013.

“2012 proves we are moving in the right direction to compete,” de Margerie told a press conference. Recent discoveries are the “start of a new chapter,” he said.

Total was little changed at 38.40 euros as of 1:07 p.m. in Paris. The stock is down 6.4 percent in the past year.

Production fell 4 percent to 2.293 million barrels of oil equivalent a day in the quarter because of a shutdown at the Elgin platform in the North Sea and flooding in Nigeria. Full- year output dropped 2 percent. Net investment will be $22 billion in 2013, matching the previous two years, Total said.

Shell, BP

Royal Dutch Shell Plc, the biggest European oil company, reported earnings below analysts’ expectations as lower North American fuel prices hurt profits. BP Plc said fourth-quarter profit declined as oil and natural gas production slipped while Exxon Mobil Corp., the world’s largest energy company by market value, beat expectations on the strength of U.S. refining.

The explorer is investing in projects from shale drilling in the U.S. and Argentina to oil sands in Canada, a refinery in the Middle East and offshore gas projects in Australia.

Production last year was hurt by a natural-gas leak at the Elgin platform that forced the evacuation and shutdown of the North Sea deposits. The company is seeking to resume operations at the fields this quarter.

“We are optimistic” for a restart soon of the Elgin field, de Margerie said at a press conference. The explorer is waiting for permission from the U.K. Health and Safety Executive and is ready to begin output at four wells at the field.

Output Growth

The company kept a target to increase output by an average of 3 percent a year from 2011 to 2015 and said production growth may be 2 percent to 3 percent this year. It also maintained a longer-term goal of reaching about 3 million barrels of oil equivalent a day in 2017.

Total is planning to begin output at five fields this year including Sulige, Anguille, Angola LNG, Kashagan and OML 58 Upgrade, according to a presentation.

Total is pushing to make larger discoveries by drilling more exploration wells. It counted four “significant” discoveries last year including Vaca Muerta in Argentina, Eben in Nigeria, King Lear in Norway and the North Platte in the Gulf of Mexico.

The exploration budget will be $2.8 billion this year, up 10 percent from 2012, with more than 60 wells to be drilled in the next 12 months in more than a dozen countries including Ivory Coast, Gabon, Kenya and Brazil. Total’s reserve replacement rate was 93 percent last year.

Best Assets

Total “has the best exploration assets of any of the majors,” according to the Bernstein report.

Refining and chemicals reported adjusted operating income in the fourth quarter of 449 million euros, compared with a loss of 126 million euros a year earlier. Brent crude prices, the benchmark for two-thirds of the world, were the highest ever on average last year at $111.68 a barrel.

The European refining margin indicator was $34 a ton in the fourth quarter, up from $15.10 a ton a year earlier and down from $51 a ton the previous quarter.

Total reiterated a plan to start the Jubail refinery in Saudi Arabia this year.

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


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