Total Reports 72% Increase in Quarterly Profit After Raising Production

Total SA, Europe’s third-biggest oil company, reported a 72 percent increase in second-quarter profit and said production will grow more than 2 percent this year because of new developments.

Profit excluding changes in inventories and the value of a stake in Sanofi-Aventis SA rose to 2.96 billion euros ($3.9 billion) from 1.68 billion euros a year earlier, the Paris-based company said today in a statement. That beat the 2.65 billion- euro mean estimate of analysts surveyed by Bloomberg.

“These are very strong figures compared to the peer group,” Richard Griffith, an analyst at Evolution Securities Ltd. in London, said in an e-mailed note. “Total has delivered significant improvements across all of its businesses. Earnings risks appear to be the upside.”

Total’s results follow rising earnings for Royal Dutch Shell Plc, which said earlier this week that profit gained 15 percent after production climbed. Italy’s Eni SpA reported adjusted profit of 1.63 billion euros ($2.12 billion), helped by a stronger dollar. BP Plc had a record loss of $17.2 billion in the quarter after taking a charge for the Gulf of Mexico spill.

Total rose 36 cents, or 0.9 percent, to 38.71 euros as of 5:36 p.m. in Paris. The shares are down 14 percent this year.

Yemen Startup

Total plans to boost output by about 2 percent, on average, annually through 2014 after starting fields in Nigeria, the Gulf of Mexico, Angola and Norway, as well as liquefied natural gas projects in Yemen and Qatar.

“We confirm that 2010 growth should be above this 2 percent average,” Chief Financial Officer Patrick de la Chevardiere said on a call. Growth in the second half will be lower than the 6 percent in the first six months, he said.

Production rose 8 percent in the quarter to 2.359 million barrels of oil equivalent a day from a nine-year low a year earlier. The company was helped by the start of a second production unit at its Yemen LNG project, lower OPEC reductions and improved security in Nigeria.

Final investment decisions are also scheduled soon on a number of projects including the Clov development off Angola.

“We are finalizing the last contract on Clov in Angola so this project is very close to being officially launched,” de la Chevardiere said. Costs for equipment for Clov are 15 percent to 20 percent lower than two years ago, when price surged, he said.

Deepwater Review

The company will start Ofon II and Engina in Nigeria “over the coming months” and may next year sanction Sulige in China, Ichthys LNG in Australia, Shtokman in Russia and Ahnet in Algeria, he said. The Ichthys investment decision may come at the end of 2011 and production may start at the end of 2016, he said, adding that investments on new projects may rise next year from $18 billion this year.

The company is reviewing its deepwater exploration and production projects, including Clov, because of the Gulf of Mexico spill. The offshore drilling moratorium also forced Total to suspend its 2010 Gulf exploration venture with Cobalt International Energy Inc.

Cobalt drilled three wells as part of the venture and these encountered “structural complexities,” de la Chevardiere said. Releasing drilling rigs due to the Gulf moratorium cost Total between $10 and $25 million, he said.

Dividend Disappointment

Total approved an interim dividend of 1.14 euros a share, unchanged from last year.

“Given the strong cash delivery we are slightly disappointed,” Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh, said in an e-mailed note. “There is still room for an increase in the second half payment.”

Refinery throughput fell by 2 percent from a year earlier, Total said. Refining margins have “pulled back sharply” since the start of the third quarter, the company said.

Total’s refinery utilization rate rose to 83 percent from 77 percent in the first quarter on improved reliability of refineries and a low level of scheduled turnarounds. Maintenance affected the Rome and Lindsey refineries in the quarter. Total plans to have reduced its global processing capacity by about a fifth, or 500,000 barrels a day, between 2007 and 2011. About 85 percent of its 2.6 million-barrel-a-day capacity is in Western Europe.

Total has received “several non-binding” offers for Lindsey, which the company wants to sell, de la Chevardiere said. The 221,000 barrel-a-day Lindsey oil-processing plant is in northeast England.

The French company is locked in a legal battle with a union over the planned dismantling of its Flanders refinery near Dunkirk, France.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

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