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Total Q3 profit falls, but better than expected
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| Copyright: | The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. | | Source: | Associated Press | | Wordcount: | |
PARIS_Total SA, Europe's third-largest oil company, reported Wednesday that net income fell 37 percent in the third quarter due to a sharp fall in energy prices, but were still somewhat better than expected.
Total posted third quarter net profit of euro1.9 billion ($2.8 billion), down from the year earlier figure of euro3.1 billion but ahead of the euro1.8 billion that analysts forecast.
On an adjusted basis, a closely watched measure of profitability that excludes inventory gains and losses and tax charges and credits, the French oil major's profit fell by an even larger 54 percent in the quarter.
Total's earnings were on par with the steep drop in third quarter profits already reported by larger rivals Exxon Mobil Corp., Royal Dutch Shell PLC and BP PLC. The industry is struggling to adapt to lower demand and the volatility in oil prices that has seen the price of a barrel spike to nearly $150 last July, then stage a retreat back to around $30 early this year.
"We have been suprised by the speed of the recovery, but we would not be surprised by continued volatility," Total Chief Financial Officer Patrick de la Chevardiere said during a conference call with analysts.
The CFO said Total expects oil to trade in a range of $60-$80 per barrel in the medium term.
Barclays Capital oil and gas industry analyst Lucy Haskins said Total's third quarter production increase was reassuring, and that with new fields starting up this year, "should continue to show improvements into 2010." Haskins rates Total's shares at overweight relative to the oil and gas sector.
During the third quarter, Brent crude averaged $68 a barrel, while on Tuesday oil traded around $77 a barrel.
Experts say prices have not risen solely because of improving demand, but mostly due to the fall in the value of the dollar.
The U.S. currency is used to buy and sell crude, so when it depreciates investors holding euros or other relatively strong currencies can buy more crude.
Last week Shell CFO Simon Henry said there are "few if any signs of demand recovering" in Europe, while the improvement seen in U.S. demand "is not firm enough to call a recovery."
Oil demand in developed countries is forecast to shrink by 4.7 percent this year due to the global economic slowdown, and to grow only 0.1 percent in 2010, according to the International Energy Agency.
Analysts expect crude prices to remain well above the levels seen in the first quarter of this year as they forecast the economy to revive, helping oil companies post higher quarterly profits in 2010.
Total has also suffered from falling production over the past year, due to lower output from existing fields and slow startup of new fields as well as security disruptions at a field in Nigeria and cutbacks by OPEC.
Production fell 2 percent last year and 6 percent in the first half of 2009. Total's output finally returned to growth in the third quarter, pumping an average of 2.2 million barrels of oil equivalent per day, or 1 percent more than a year earlier.
Production is still down 4 percent for the first nine months of the year, though, and Total doesn't forecast a return to full-year growth in output until next year.
The company said output was lifted by ramping up production in fields in Nigeria and the Gulf of Mexico, as well as in new fields in Norway, Angola and Qatar. Total said it is pursuing new projects in Bolivia, Algeria and Thailand with the aim of further lifting production.
These investments accounted for some of the $12.2 billion that Total invested in its operations through the first nine months of the year. It has budgeted $18 billion of investments this year, excluding acquisitions, as it aims to find new fields to replace declining production from older sites.
In afternoon trading on the Paris stock exchange Total shares were up 1 percent at euro41.36.
This is a news service of Thomson Business Intelligence Service ©2006. This content is for your personal use only, subject to Terms and Conditions. No redistribution allowed.
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