By Michel Rose
PARIS (Reuters) – French oil major Total (TOTF.PA) posted higher than expected second-quarter profit on Wednesday, helped by increased refining margins in Europe and accelerated cost-cutting efforts to adjust to a low oil price environment.
The fourth-biggest western oil company reported $ 3.085 billion in net adjusted profit, a 2 percent drop from the same period a year ago. Crude oil prices collapsed by 44 percent over the same period.
Analysts expected adjusted net profit of $ 2.61 billion, according to a Thomson Reuters I/B/E/S consensus.
Profits at its “downstream” refining and chemicals sector tripled, while oil and gas production rose from a year ago thanks to new start-ups and the return of barrels from an Abu Dhabi concession.
At 2.299 million barrels of oil equivalent, output was slightly lower than in the first quarter, however, due to the shutdown of a liquefied natural gas plant in war-torn Yemen.
Total said it was expecting to exceed its cost reduction target of $ 1.2 billion (770 million pounds) this year, which it had already raised from a previous $ 800 million goal.
It confirmed its objective to cut capital expenditure to $ 23-24 billion this year.
Oil companies are cutting spending on exploration and have cancelled projects in high-cost areas such as Canadian oil sands after the collapse in oil prices in the second half of last year.
Total kept its dividend unchanged for the second quarter, at 0.61 euros per share.
Shares have fallen by 20 percent since a peak in June last year, but have nevertheless performed better than its four other ‘Big Oil’ rivals. The group has been praised by analysts for moving early on cost cuts.
On Wednesday it announced it was selling 20 percent of its Laggan-Tormore gas field in the Shetlands to SSE (SSE.L) for 565 million pounds. It said it was in talks to sell several other assets, without elaborating.
It still expects oil and gas production to rise by more than 8 percent this year, despite the shutdown of Yemen LNG. In the second half, Total expects production to start at Laggan-Tormore, Surmont Phase 2 in Canada and GLNG in Australia.
In its downstream, or refining, sector Total, Europe’s biggest refiner, said market conditions remained favourable at the start of the third quarter.
(Reporting by Michel Rose; editing by Susan Thomas)
