Total’s Profit Rises 20% as European Refining Margins Widen

Total SA, Europe’s third-largest oil producer, said profit grew 20 percent in the third quarter, beating analyst estimates as earnings from refining improved.

Profit excluding changes in inventories rose to 3.3 billion euros ($4.3 billion) in the third quarter from 2.8 billion euros a year earlier, the Paris-based company said today in a statement. That compares with the 3.1 billion-euro average estimate of 11 analysts surveyed by Bloomberg.

“Refining benefited from the strong cracks seen over the summer,” Matthew Yates, an analyst at Bank of America Corp. in London, wrote today, referring to wider profit margins from turning crude into fuel products. Results at the explorer’s downstream division were better than expected, he said.

Total rose 17 cents to close at 38.82 euros in Paris.

The European refining margin indicator was $51 a ton in the third quarter, from $13.40 a ton a year earlier and $38.20 a ton the prior quarter. The increase marks a turnaround from the past two years when refiners warned of overcapacity in Europe that prompted Total to shut a plant in Dunkirk, northern France.

Adjusted net operating income in the refining and chemicals division rose 54 percent to 564 million euros amid a “more favorable refining environment,” Total said. The company kept the quarterly dividend unchanged at 59 cents a share.

Refining Income

“The refining margin reached a level that we haven’t seen since September 2008,” Chief Financial Officer Patrick de la Chevardiere said on a conference call. “We do not consider that the margin will remain at such high levels in the future.”

The measure of profitability was $35 a ton today, he said.

Total’s production fell 2 percent to 2.27 million barrels of oil equivalent a day in the quarter as field halts, including those in the North Sea, countered growth from new projects. Benchmark Brent crude futures dropped 2.4 percent in the period from a year earlier as slowing global growth curbed demand.

Production this year has been hurt by a natural-gas leak at the Elgin platform that forced the evacuation and shutdown of North Sea deposits. The company is seeking to resume operations at the fields by the end of the year, it said today.

“Full year production could be slightly down compared to 2011,” de la Chevardiere said. “For 2013 the average production will certainly not be at the 2011 level but we expect it to be higher than the average of 2012.”

Production Outlook

Output in the fourth quarter will be affected by flooding in Nigeria, as well as high levels of planned maintenance in offshore Nigeria, the U.K.’s North Sea and Qatar, de la Chevardiere said. That may be partly countered by startups in South Mahakam in Indonesia and Angola, he said.

The company said in September it expects to increase output by an average of 3 percent a year from 2011 to 2015. It has also set a longer-term target of reaching about 3 million barrels of oil equivalent a day in 2017.

Total, whose largest European competitors are Royal Dutch Shell Plc and BP Plc, is pushing to make larger discoveries by drilling more exploration wells. It says it will assess recent finds in Azerbaijan and French Guiana in coming months and prepare exploration wells in the Gulf of Mexico, Iraq, Ivory Coast, Kenya and Gabon.

The company increased sales of liquefied natural gas cargoes to 27 in the most recent quarter compared with 16 in the previous three months, de la Chevardiere said.

“LNG is a core business for Total,” he said. The business makes up about 24 percent of the upstream net operating income.

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