France's Total bucks trend with production rise in Q2

France's Total August 1 bucked the trend among the world's leading producers by reporting an increase in oil and gas production for the second quarter.

Reaping the benefits of its strategy to invest more in the upstream sector in recent years, the Paris-based company saw its profits jump in the period, boosted not only by the higher volumes but also by record oil prices. Adjusted earnings for the quarter totaled $5.8 billion, up 39% over the same period a year earlier.

The rise brings the company closer in profit terms to rival European oil majors BP and Shell, which earlier in the week posted adjusted earnings for the same period of $6.85 billion and $7.9 billion, respectively.

Against the backdrop of record oil prices, Total's profit came largely from its upstream oil and gas business, which saw adjusted net operating income rise 72% on the year to $4.84 billion.

The company's oil and gas output rose to 2.353 million b/d of oil equivalent, up 1.3% on the year, with oil output broadly unchanged and gas output rising by 4%. This put it well ahead of most of its peer group, with ExxonMobil having posted an output fall for the period of 7.8%, Shell 3%, Chevron 3.4% and ConocoPhillips 7.8%.

BP managed a modest production increase of 0.7%, but Total's growth was only bettered by Italy's Eni, whose oil and gas output rose 2.1%.

Almost all the majors are seeing their oil production fall this year, and are relying largely on growth in gas to offset the declines. Total's oil output was largely flat on the year, whereas its peers saw liquids volumes fall by anything from 3% to 13%.

Total said the negative impact of high prices on the volumes it receives from some of its production sharing contracts dented its output by 2.5%, but this was outweighed by a 3% rise in underlying growth, mainly from new fields such as Dalia and Rosa in Angola and the Dolphin project supplying gas from Qatar to the UAE.

Production could have been even higher without the negative impact of the unrest in Nigeria's Niger Delta region, where attacks by militants have caused widespread production losses and shut-ins over the last two years. Total CFO Patrick de la Chevardiere told a conference call the Nigerian problems were currently costing Total around 60,000 boe/d of oil and gas production.

Most of Total's losses are from fields operated by the Shell-led joint venture SPDC in which the French company has a minority stake, de la Chevardiere said. SPDC has the capacity to produce around 1 million boe/d, mostly oil, but its production is currently only around 400,0000 boe/d, the Total official said.

The company's average realized hydrocarbon price for its oil and gas volumes climbed to $87.30/boe, 66% higher than in the same period of 2007.

Earnings from the downstream oil fell 10% to $917 million, a much smaller fall than those suffered by BP and Shell earlier in the week. De la Chevardiere said strong distillate margins had helped Total's downstream business outperform its rivals.

Total, Europe's biggest refiner, said its average refining throughput during the quarter fell 2% on the year to 2.297 million b/d, mainly as a result of the November 2007 sale of the Milford Haven refinery in the UK and maintenance at the Leuna refinery in Germany.

Like other integrated oil majors, Total's chemicals operations struggled to cope with a difficult operating environment during the quarter. The company's chemicals business saw earnings fall 65% to $109 million on the back of weak margins.

Created: August 1, 2008

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