French oil company Total posted a 14 percent rise in fourth-quarter underlying profits on Wednesday, thanks to record oil prices and a small rise in production, and predicted sector-beating growth in coming years.
The fourth-biggest western major oil company said fourth-quarter adjusted net profit - which strips out one-off items and unrealised gains or losses related to changes in the value of inventories - was 3.11 billion euros ($4.53 billion).
This was slightly ahead of an average forecast of 3.05 billion euros in a Reuters poll of nine analysts, and coupled with Total's bullish outlook for oil and gas production contributed to lift Total shares by 0.5 percent at 49.73 euros by 1415 GMT, outpacing the European energy sector.
"It's steady as she goes," said Exane BNP Paribas analyst Iren Himona. "It was a solid earnings presentation. The message is the long-term growth is unchanged and the portfolio visibility remains very good." For the full year, Total said adjusted net profit fell 3 percent to 12.20 billion euros, after a weak first half.
In dollar terms, Total's fourth-quarter underlying result rose 28 percent, compared to a rise of 4 percent at western Europe's largest oil company, Royal Dutch Shell Plc and a 1 percent drop at the second-largest, BP Plc.
Total also outshone its rivals by predicting a significant rise in oil and gas production in 2008 and reiterating its target of increasing oil and gas production by an average 4 percent a year between 2006 and 2010.
Shell has said it expects output to fall in 2008 and trimmed its growth targets to the end of the decade. BP expects a small rise in 2008 and growth of around 2 percent to 2012.
NEW FIELDS: In the fourth quarter, Total's output rose 2.4 percent to 2.461 million barrels of oil equivalent per day. The ramp-up of the Dalia and Rosa offshore fields in Angola and the start up of the Dolphin liquefied natural gas plant in Qatar helped Total make up for disruptions due to civil violence in Nigeria and a fire at its Congo Republic Nkossa oil field.
Total's full-year output rose 1.5 percent, compared with drops at Shell, BP and Exxon Mobil, but this was well shy of the 7 percent growth Total initially targeted for 2007.
The miss partly reflects the way higher oil prices reduce the amount of oil that companies are entitled to under production-sharing agreements with producer nations but also follows an industry trend of missed or cut output forecasts.
For 2008, Total said the coming onstream of new projects such as the Moho Bilondo offshore oil field in the Republic of Congo and the Jura gas and condensate field in the North Sea will help it achieve a "significant" rise in production.
But it declined to give a specific growth target, which several analysts said was understandable after unplanned incidents forced Total to trim its 2007 forecast four times. "The most important thing is that they stuck to their long-term target of 4 percent average annual growth," said an analyst who asked not to be named.
As usual, Total's core upstream oil and gas production division was the main profits driver, with fourth-quarter earnings up 36 percent year on year. This was boosted by crude prices which averaged around $90/barrel in the fourth quarter - a 50 percent rise compared with the same period a year earlier.
WEAK RESERVES: Total said its reserve replacement rate (RRR) - the extent to which production is matched by new finds - was 78 percent in 2007, excluding acquisitions and divestments, highlighting a trend of shrinking asset bases at western oil companies.
Citigroup said that including the impact of Venezuela's forced acquisition of a controlling stake in the Sincor heavy oil projects, which cost Total 400 million barrels of reserves, the RRR was 23 percent.
Chevron, the smallest of the five western "Supermajors", said it had an RRR of only 10-15 percent and analysts expect Shell to also report a low figure. Accessing new reserves is the biggest challenge facing western oil companies. Increasingly, resource holders are reserving their richest fields for their state oil companies and only invite foreign firms in to help develop the more complex fields and even then under increasingly stringent terms.
Total also announced an 11 percent rise in full-year dividend of 2.07 euros. Total shares trade at a premium to many rivals because of investor faith in its growth prospects. Its share price to earnings ratio, using 2008 consensus estimates, is 8.98 times, compared to 8.16 times for Shell and 8.6 for Chevron, according to Reuters data.
Comments
Comments are closed.