While the return of US sanctions on Iran derailed a major gas endeavour of the French energy giant, the move also boosted oil prices just as Total reaped the benefits of project startups from Australia to Africa and the Arctic, plus a series of acquisitions. Profit surged 44% in the second quarter as crude jumped to a three-year high.
“The upstream is well positioned to take advantage of the increase in oil prices,” Total said Thursday in a statement. “The group, however, resolutely continues to implement programs to improve operational efficiency and to reduce its break-even, so as to remain profitable whatever the context.”
Total pumped the equivalent of 2.717 million barrels a day of oil and gas in the period, setting a record for a second consecutive quarter. It boosted its growth target for this year to more than 7%, up from an estimate of greater than 6% given in April.
After cutting billions of dollars in costs to survive the biggest downturn in a generation, Big Oil is chasing growth again. Part of the extra cash from rebounding oil prices is being used to reward shareholders, while companies still seeking to limit the cost of new projects amid concerns that global trade tensions and an increase in OPEC production could weaken prices again.
Adjusted net income climbed to US$3.55 billion in the second quarter, up from US$2.47 billion a year earlier, said Total, which is based near Paris. That was just below the US$3.6 billion median of 11 analysts’ estimates. Cost savings will reach US$4.2 billion this year compared with 2014, slightly exceeding its previous goal.
Total raised its second quarter interim dividend by 3.2%, in line with a promise made in February to increase the payout by about 10% by 2020. It has bought back US$600 million shares so far this year as part of a plan to return as much as US$5 billion to shareholders over three years. That’s on top of repurchasing any new stock issued each quarter to pay the scrip part of its dividend.
Project startups
Total’s net operating income from exploration and production, also known as upstream, nearly doubled in the second quarter from a year earlier to US$3.15 billion (2.69 billion euros). At its refining and chemicals division the same profit measure fell 5% to US$821 million. Rising prices tend to eat into margins earned from processing crude into fuels, while the company also reported maintenance at its Belgian refinery.
Oil and gas production climbed 8.7% from a year earlier, led by a 22% jump in liquids output, as projects including the Yamal liquefied natural gas plant in Russia and the Fort Hills oil field in Canada continued to ramp up.
Total also benefited from a string of deals, including the US$1.95 billion purchase of Brazilian assets from Petrobras in January, the US$7.45 billion acquisition of Maersk Oil, completed in March, and the US$450 million purchase of Marathon Oil Corp’s assets in Libya the same month. They offset the expiration of the Mahakam permit in Indonesia at the end of 2017.
The startup of the Ichthys LNG project in Australia, the Kaombo field in Angola, and the Egina project in Nigeria should drive further acceleration of growth this year. Total’s gas, renewables and power unit, whose profit doubled to US$193 million in the quarter, will also get a boost from the acquisitions of Engie SA’s LNG assets and utility Direct Energie.