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Total Profit Drops 7% on Lower Oil Price as Production Falls

Total SA (FP), Europe’s third-largest oil producer, reported a 7 percent decline in earnings as output fell and weakening fuel demand pushed down the price of crude.

Profit excluding changes in inventories retreated to 2.9 billion euros ($3.8 billion) in the first quarter from 3.1 billion euros a year earlier, the Paris-based company said today in a statement. That met the 2.92 billion-euro average estimate of 14 analysts surveyed by Bloomberg.

Production slipped 2 percent to 2.32 million barrels of oil equivalent a day as Total suffered the shutdown of a platform in the North Sea. The effect of lower volumes was compounded by sliding Brent-crude prices, which averaged $112.61 a barrel in the quarter, down 4.9 percent as economic stagnation cut demand.

The results were “below our expectations with disappointing production,” said Alexandre Andlauer, an analyst at Alphavalue SAS in Paris.

Total retreated 1.4 percent to close at 37.55 euros. The company will pay a quarterly dividend of 59 cents a share, unchanged from the previous quarter.

Net income slumped 58 percent following a $1.65 billion writedown for canceling the Voyageur Upgrader project in Alberta, which was beset by rising labor costs and a discount on the price of Canadian heavy crude.

Growth Target

Total has failed to raise quarterly output, when compared with year-earlier figures, since the last three months of 2010. Chief Executive Officer Christophe de Margerie has pledged to boost volumes, targeting production growth of an average 3 percent a year through 2015. Output may reach about 3 million barrels of oil equivalent a day in 2017.

“We remain confident Total can hit guidance of 3 percent production growth this year,” Oswald Clint, a London-based analyst at Sanford C. Bernstein & Co., wrote today in a report. Total has the best exploration assets of any of the big oil companies, he said.

Royal Dutch Shell Plc (RDSA) and BP Plc (BP/), Europe’s largest oil producers, will post lower quarterly profit when they announce results next week, analysts’ estimates show. Exxon Mobil Corp. (XOM), the world’s largest oil company by value, yesterday reported earnings that were little changed as widening profit margins in its chemicals business made up for lower oil output and prices.

Total’s refining and petrochemicals division posted adjusted operating income of 410 million euros in the quarter, compared with a loss of 43 million euros the previous year. European refining and petrochemicals margins have been “trending favorably” in the second quarter, the company said.

Elgin Halt

Total’s Elgin platform in the North Sea was shut for most of the reporting period following a natural-gas leak in March 2012. Production resumed on March 9 this year, and is now about half its level before the incident.

The company’s targeted increase in output is dependent on the timely startup of new projects, including the Sulige gas deposit in China and Kazakhstan’s Kashagan field. Total expects these new ventures to add 160,000 barrels a day. It’s also investing in shale drilling in the U.S., a refinery in the Middle East and offshore gas in Australia and the North Sea.

The company, which has pledged to explore more aggressively for reserves, said yesterday it found oil in the Ivoire-1X exploration well in the western portion of Block CI-100 in Ivory Coast.

“We haven’t yet found the elephant we are looking for,” Chief Financial Officer Patrick de la Chevardiere said today on a conference call. Explorers use the term “elephant” for giant discoveries.

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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