The Rising Influence of Rising Affluence

[DewDiligence]

Output Declines, Low Prices Hit Total

[TOT’s 2Q09 Y-o-Y production fell 7%, the worst showing by any of the oil majors. Management says the full-year 2009 production numbers will look much better.]

http://online.wsj.com/article/SB124902247045096217.html

›By ADAM MITCHELL
JULY 31, 2009, 6:44 A.M. ET

PARIS -- French major oil firm Total SA Friday posted a 54% fall in second-quarter net profit because of lower oil prices and declines in output and refining profits.

France's largest company by market value said net profit fell to €2.17 billion ($3.1 billion) in the three months ended June 30, from €4.73 billion a year earlier. [See below for the earnings gifures that are compatible with US GAAP.] Sales for the quarter fell 35% to €31.43 billion from €48.2 billion a year earlier.

The average price of Brent crude oil over the quarter was $59.10 per barrel, less than half the $121.2 average price in the same period a year earlier, Total said.

Despite the start-up this year of fields in Nigeria, the Gulf of Mexico and Norway, Total said its output also fell relative to the previous quarter due to high levels of maintenance, the impact of higher prices on how much oil it is entitled to in production-sharing agreements and weak gas demand linked to the economic recession.

Still, the company said it expects over the rest of the year to ramp up production at the new fields it has brought on stream this year, and from the start-up of liquefied natural gas projects in Yemen and Qatar as well as the Tombua Landana oil field in Angola.

Total's European refining margins narrowed 69% in the second quarter of 2009 from a year earlier, according to an indicator the company released July 15, amid weak demand for petroleum products, high supply of diesel in Europe and more expensive heavier feedstocks.

Friday, the company said European refining margins are "currently at very weak levels."

Total's President of Refining and Marketing Michel Benezit told Dow Jones Newswires in a July 3 interview he expected weak demand for petroleum products to continue through the end of the year and didn't see signs of a global recovery in demand.

Total's profit after tax -- excluding inventory changes, nonrecurring items and the group's equity share of the amortization of intangibles related to the Sanofi-Aventis merger -- also fell 54% to €1.72 billion from €3.72 billion in the same period a year earlier.

The second-quarter adjusted profit figure came in slightly above an average estimate of €1.69 billion, according to a Dow Jones Newswires survey of 14 analysts.

The adjusted profit figure is closely watched by analysts, who consider it a better performance measure because it excludes the often-volatile value of oil inventories.‹