Total’s profit, production drop

French oil company Total today reported its adjusted net income for the second quarter of 2014 fell 12% compared to the corresponding period of 2013. The company recorded income of ∼$3.2 billion versus ∼$3.6 billion a year ago.

Commenting on the results, Chairman and CEO Christophe de Margerie said: “Growing geopolitical tensions marked the second quarter environment and despite the stability of the Brent price, drew attention to the sensitive balance of the oil markets.

“In this context, the Group reported adjusted net income of $3.2 billion, slightly less than in the previous quarter, essentially due to exceptionally heavy maintenance in the Upstream.
“The highlight of the quarter was the start-up of CLOV in deep-offshore Angola, which demonstrates yet again the excellence of the Group in major project management. Going forward, we are fully mobilized and focused on starting up the next set of operated projects. In addition, the final investment decisions to launch Kaombo in Angola and Edradour in the UK, approved only after rigorous cost reductions, illustrate the Group’s capital discipline and strengthen its production profile through 2017.

“The Group performed relatively well in the downstream, despite an unfavorable environment for refining and marketing in Europe and scheduled turnarounds for maintenance on several sites. Every segment is playing a role in optimizing the asset portfolio. The sales of Shah Deniz in Azerbaijan, the coal mines in South Africa and Totalgaz have been announced.

“Finally, all the segments have progressed in setting detailed cost reduction targets within the framework of the 3-year plan announced at the beginning of the year. This plan, which is essential to the Group’s performance and in keeping with the commitments on safety and environment, will bear its first fruits in 2015.”

Adjusted net operating income from the Upstream segment was $3,05 billion in the second quarter 2014, stable compared to the second quarter 2013.

The negative impact of the decrease in hydrocarbon production and the increase in costs due to the high level of planned maintenance was offset mainly by the higher realized price for liquids and the lower tax rate. The effective tax rate for the Upstream segment was 52.3% compared to 58.2% in the second quarter 2013. This decrease is mainly due to tax allowances in the UK, notably on the Laggan field, recognized in the second quarter 2014.

Hydrocarbon production was 2,054 thousand barrels of oil equivalent per day (kboe/d) in the second quarter 2014, a decrease of 10% compared to the second quarter 2013, essentially due to the following :

• -6.5% for changes in the portfolio, essentially the expiration of the ADCO license in the United Arab Emirates;
• -0.5% for security conditions which improved in Nigeria but deteriorated in Libya; and
• -3% for the normal production decline and the high level of planned maintenance, partially offset by the ramp up on new projects.

Excluding the ADCO license, which expired in January 2014, hydrocarbon production in the second quarter 2014 decreased by 4% and 5% compared to the second quarter 2013 and first quarter 2014, respectively.