European oil giant Total saw profits fall by 19% reported a 19 percent decline in fourth-quarter profit as refining margins in the region narrowed and output dropped.
Profit excluding changes in inventories dropped to 2.47 billion euros ($3.4 billion) from 3.04 billion euros a year earlier, the Courbevoie, France-based company said today in a statement. That compared with a 2.57 billion-euro average estimate of 11 analysts surveyed by Bloomberg.
Total follows Royal Dutch Shell and BP, Europe’s largest oil and gas companies, in reporting lower earnings as the cost of drilling rises, prices stagnate and refining profits slump. As the biggest refiner in western Europe, where it operates eight plants, Total has borne the brunt of lower crude- processing margins amid falling consumption.
“The significant deterioration of European refining margins was partially offset by a more favorable environment for petrochemicals,” said chief executive Christophe de Margerie.
The company said capital spending this year would drop to $26 billion this as oil and gas developments were completed. A strong balance sheet allows Total to increase returns to shareholders, the company said.
Total raised the quarterly dividend to 61 cents a share from 59 cents. The stock rose as much as 1.9 percent to 44.43 euros in Paris and traded at 44.09 at 9:41 a.m. local time.
“The intensive investment phase that we embarked on to transform our production profile by 2017 reached a peak of $28 billion in 2013,” de Margerie said.
Total kept targets through 2017, planning to start new projects to increase production to 2.6million barrels a day in 2015 – including the North Sea Laggan-Tormore fields – and about 3million barrels a day two years later.
It also has promised to explore more aggressively for new oil and gas deposits, while reducing its European refining and petrochemicals business by 20 percent from 2012 to 2017.
The company earned $10.10 for every metric ton of crude it refined into fuels in Europe, compared with $33.90 a year earlier. Oil and gas production shrank 0.5 percent to 2.28 million barrels a day in the quarter, Total said.
Brent crude prices averaged $109.35 a barrel in the fourth quarter, 0.7 percent lower than a year earlier.
Total has a 16.8 percent stake in Kazakhstan’s Kashagan project, the world’s biggest crude discovery in 40 years, which produced its first oil in September before being shut because of gas leaks. The French producer has also grappled with security problems in Yemen and is seeking oil-production rights in Abu Dhabi after a concession expired.
As Total develops so-called mega-projects, de Margerie is selling assets to help pay for them. The company has targeted $15 billion to $20 billion in asset sales from 2012 to 2014, including stakes in Nigeria’s offshore Usan field, Congolese operations and an Angolan oil deposit.
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