Total Profit Beats Estimates as Production, Refining Advance

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Total Profit Beats Estimates

Total SA’s second-quarter profit almost matched year-earlier results as higher margins at Europe’s biggest refining business helped the company shrug off a 50 percent slump in crude prices.

Net income, excluding some non-recurrent items, slid 2.1 percent to $3.09 billion from a year earlier, beating the $2.67 billion average of 15 estimates compiled by Bloomberg. The dividend will remain at 61 euro cents ($0.67) a share, the Courbevoie, France-based producer said Wednesday in a statement.

Total confirmed a target to cut costs by $1.2 billion while increasing output by 12 percent to the equivalent of 2.3 million barrels of oil a day as new projects started in Angola, the North Sea and Russia. The production gain and the highest refining margins in at least 12 years are helping Europe’s second-biggest oil company weather a crude-price crash.

“Results look robust across the board,” Marc Kofler, an analyst at Jefferies Group LLC, wrote in a report, saying he expects the earnings consensus to rise by as much as 5 percent. “The outlook statement also is encouraging.”

Total rose as much as 2.5 percent in Paris trading after net income dropped 4 percent to $2.97 billion. The shares were trading 52 cents higher at 43.73 euros as of 12:05 p.m. local time, paring their decline over the past year to 16 percent.

The company is focused on lowering costs to “sustainably reduce its break-even and maximize cash flow,” Chief Executive Officer Patrick Pouyanne said in a statement.

Output Target

Brent crude, the benchmark blend for more than half the world’s oil, has slumped by more than half from its mid-2014 peaks amid a global supply glut.

Total confirmed a target to raise output by more than 8 percent in 2015 and said the start of projects before year-end include the Gladstone liquefied natural gas development in Australia, Laggan-Tormore and the Surmont 2 oil-sands unit in Canada. Increasing output from new prospects and a concession in Abu Dhabi in the quarter helped the company offset a halt at its LNG unit in Yemen.

Adjusted net operating income from refining and chemicals, which benefit from lower oil prices, rose threefold to $1.35 billion.

In the refining business, European margins rose to $54.10 a metric ton from $47.10 in the first quarter and $10.90 a year earlier. It was the highest level since at least 2003.

Asset Sales

Total plans to cap spending at $23 billion to $24 billion in 2015, down from $26 billion last year. The company also announced the sale of a 20 percent stake in the Laggan-Tormore project west of the Shetland Islands in Scotland to SSE Plc for 565 million pounds ($882 million).

The producer has plans for $10 billion of asset sales through 2017, including $5 billion this year. Total said second-quarter asset sales amounted to $733 million, bringing those for the first half to $3.5 billion.

BP Plc reported the lowest quarterly profit in at least 10 years Tuesday after a boom in trading faded and the conflict in Libya forced almost $600 million of writedowns.

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