Total profits hit by volatile oil prices despite record output

0
1193
Fuel prices sit illuminated on a sign as an automobile stands beside petrol pumps on the forecourt of a gas station operated by Total SA, at night in Luc-La-Primaube near Rodez, France, on Saturday, Dec. 12, 2015. Oil extended declines from the lowest price since February 2009 as Iran pledged to boost crude exports, bolstering speculation OPEC members will exacerbate the global oversupply. Photographer: Balint Porneczi/Bloomberg

Bate Felix

PARIS (Reuters) – French energy major Total said its net profit for the first three months of the year fell 4 percent to $2.8 billion compared with a year ago due to volatile oil prices and debt costs, despite record oil and gas output.

The firm kept its investments, and cost savings target for the year unchanged, and said production growth should exceed 9 percent during the year, thanks to the ramp-up of projects started in 2018, and the start-ups of others in Angola, Brazil, Britain and Norway.

It said it would take advantage of the low cost environment to launch further projects in Brazil, Uganda and Russia.

Total shares were a touch down 0.4 in early session trading, with the stock up nearly 10 percent so far in 2019.

“A decent start to the year,” wrote analysts at RBC Capital Markets on Total’s results, as they kept an “outperform” rating on the stock.

Total’s adjusted net profit, which was down for the first time since the fourth quarter of 2016, was hit by lower oil prices, with the Brent price averaging $63 per barrel in the January to March period, down 6 percent year-on-year.

The adjusted net profit was nevertheless slightly above average analysts’ forecast of $2.7 billion, while Total also raised its dividend.

Natural gas prices slumped in Europe by 11 percent, and in Asia by 30 percent, Total said.

The company said an increase in the net cost of its net debt compared with last year, mainly due to the rise in U.S. dollar interest rates, had also weighed on its profits.

Its refining margin was also volatile during the quarter, the company said.

“Total’s balance sheet is strong, with gearing below 20 percent, in line with the objective,” said Total’s chairman and chief executive Patrick Pouyanne.

Total’s cash flow after organic investments rose 18 percent year-on-year to $3.2 billion thanks to strong operational performance and spending discipline. Its so-called organic pre-dividend cash breakeven was less than $25 per barrel.

Oil and gas output reached a record level in the quarter at 2.95 million barrels of oil equivalent per day (Mboe/d), up 9 percent year-on-year.

Total increased its first interim dividend for 2019 by 3.1 percent to 0.66 euros ($0.7350) per share, and it also bought back shares during the quarter.

The French group said it would maintain discipline on spending in 2019 and it kept its net investment target at $15 to $16 billion, and cost savings at $4.7 billion.

VOLATILE ENVIRONMENT
Since the start of the second quarter, the Brent oil price has traded at around $70 per barrel with disruptions in Venezuela, uncertainty in Libya and compliance with OPEC production quotas providing some support to the price.

Nevertheless, Total said the environment remained challenging.

“The environment remains volatile, however, with uncertainty around the evolution of non-OPEC supply and the impact of global economic growth on demand,” said Total. ($1 = 0.8979 euros)

Reporting by Bate Felix; Editing by Sudip Kar-Gupta and Elaine Hardcastle

SHARE
Previous articleSouth Africa’s rand strengthens slightly ahead of U.S. growth data
Next article
Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.