Total SA’s first-quarter profit exceeded analysts’ estimates as refining gains and the fastest rate of production growth in more than a decade helped soften the blow of a 50 percent drop in oil prices.
Net income excluding changes in inventories was $2.6 billion, beating the $2.17 billion average of nine estimates compiled by Bloomberg. Adjusted net operating income from its refining and chemicals unit, which benefits from lower oil prices, more than tripled to $1.1 billion, the Courbevoie, France-based company said in a statement on Tuesday.
Europe’s third-biggest oil company is “demonstrating its resilience and profiting from its integrated model,” Chief Executive Officer Patrick Pouyanne said in the statement.
Total plans to reduce spending, cut jobs and curtail exploration this year after the price of Brent crude, the benchmark for more than half the world’s oil, dropped amid a global supply glut.
The average price Total sold its oil for during the first quarter fell 50 percent to $53.90 a barrel from $108.20 a year earlier.
The cost-saving program includes a hiring freeze, cutting 2,000 jobs in marketing and services and a 15 percent reduction in corporate staff through 2017. The company also plans $10 billion of asset sales in the period, including $5 billion this year.
Net income fell 20 percent to $2.66 billion, or $1.13 a share, from $3.34 billion, or $1.46, a year earlier, the company said. Sales dropped 30 percent to $42.3 billion. Total is maintaining its dividend at 61 euro cents (66 U.S. cents) a share, according to the statement.
European refining margins rose to $47.10 a ton in the first quarter from $6.60 a year earlier, driven by strong demand particularly for gasoline. That’s the highest level since the third quarter of 2012.
“Since the beginning of the second quarter refining and petrochemicals margins have remained strong, despite the structural overcapacity in Europe, which will weigh on margins in the medium term,” Total said.
First-quarter production rose 10 percent to the equivalent of 2.395 million barrels of oil a day, in part due to a new concession in the United Arab Emirates.
Total warned second-quarter production will be affected by maintenance work in Nigeria, the UK and Norway.
Total expects to raise output this year by 8 percent to 2.32 million barrels a day.
The increase comes in part from the start up of five more projects including Siberian gas venture Termokarstovoye in the second quarter.
Before year-end, Total will commence operations at the Gladstone liquefied natural gas project in Australia, the Laggan-Tormore fields off the Shetland Islands, the Surmont 2 oil-sands development in Canada and Vega Pleyade field offshore Argentina.
The company wrote down the value of assets in Libya and Yemen due to “deteriorating security conditions.”
Total’s results come the same day as BP Plc issues its quarterly earnings. Exxon Mobil Corp., ConocoPhillips and Royal Dutch Shell Plc are scheduled to report on Thursday.
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