PARIS/LONDON - French oil major Total posted higher-than-expected first quarter net profits, excluding one-offs and inventory gains, of 3.25 billion euros ($5.03 billion) as record oil prices made up for the weak dollar and a drop in refining margins.
The world's fourth-largest non government-controlled oil group by market value said in a statement on Wednesday that the 9 percent rise in underlying profits came despite flat oil and gas production in the quarter, compared to last year.
Total's Chief Financial Officer Robert Castaigne said production would grow in coming years, although, if oil prices stay high, the growth may average closer to 3 percent a year, rather than the 4 percent earlier envisaged.
Under modern production contracts, oil companies' share of project volumes fall, and the host country's take increases, when oil and gas prices rise.
After rivals such as Royal Dutch Shell Plc and BP Plc significantly beat expectations, Total's shares fell following the results. the shares closes down 0.39 percent at 54.3 euros compared to a 0.7 percent rise in the DJ Stoxx European oil and gas sector index .
"Total announced a good number of portfolio developments and progress on important projects during the quarter. However, we feel this was not the set of results to light up performance," Colin Smith at Dresdner Kleinwort said.
A near 70 percent rise in the price of crude to average almost $100/barrel, before going on to hit a new record above $120/barrel this month, underpinned the rise in profits at France's biggest listed company with a market capitalisation of just over $200 billion.
Nonetheless, Total's result compares well with rivals, with Italy's ENI reporting a 14 percent rise in profits, calculated in a similar manner.
The Paris-based group said in dollar terms, quarterly net income was up 24 percent to $4.873 billion, compared to Shell's 20 percent rise in earnings, calculated on a similar basis.
Refining profits halved as higher crude prices hit margins.
PRODUCTION STALLS
Total said hydrocarbon production was essentially flat at 2.426 million barrels of oil equivalent per day (boepd).
An outage at the North Sea Elgin-Franklin gas field and the impact of production sharing contracts with producer nations, under which companies receive less oil from projects when oil prices rise, balanced higher production in Angola and an output ramp-up at its Dolphin liquefied natural gas plant in Qatar.
Castaigne said he was optimistic of achieving Total's target of 4 percent growth between 2006 and 2010, a target based on oil averaging $60/barrel. If oil prices averaged $100/barrel, growth may be more like 3 percent, the CFO said.
Even 3 percent growth would likely beat most peers.
David Thomas, oil analyst at Citigroup said Total's shares looked cheap compared to rivals like BP and Shell as he believed Total will grow output more quickly but said investors will likely wait for Total to show how it will deliver this growth before rewarding its shareholders.
"We argue Total has better growth prospects ... but fear that relative outperformance may be limited until the growth catalyst becomes clearer," he said in a research note after the results.
Total's stock has shed 4 percent since the start of the year -- roughly in line with the rest of the European energy sector -- hurt by worries that escalating oil prices and cost inflation may make it difficult reach production growth targets.
Total's adjusted result in the first three months compares with an average forecast of 3.183 billion euros from a Reuters poll of 11 analysts.
The world's fourth-largest non government-controlled oil group by market value said in a statement on Wednesday that the 9 percent rise in underlying profits came despite flat oil and gas production in the quarter, compared to last year.
Total's Chief Financial Officer Robert Castaigne said production would grow in coming years, although, if oil prices stay high, the growth may average closer to 3 percent a year, rather than the 4 percent earlier envisaged.
Under modern production contracts, oil companies' share of project volumes fall, and the host country's take increases, when oil and gas prices rise.
After rivals such as Royal Dutch Shell Plc and BP Plc significantly beat expectations, Total's shares fell following the results. the shares closes down 0.39 percent at 54.3 euros compared to a 0.7 percent rise in the DJ Stoxx European oil and gas sector index .
"Total announced a good number of portfolio developments and progress on important projects during the quarter. However, we feel this was not the set of results to light up performance," Colin Smith at Dresdner Kleinwort said.
A near 70 percent rise in the price of crude to average almost $100/barrel, before going on to hit a new record above $120/barrel this month, underpinned the rise in profits at France's biggest listed company with a market capitalisation of just over $200 billion.
Nonetheless, Total's result compares well with rivals, with Italy's ENI reporting a 14 percent rise in profits, calculated in a similar manner.
The Paris-based group said in dollar terms, quarterly net income was up 24 percent to $4.873 billion, compared to Shell's 20 percent rise in earnings, calculated on a similar basis.
Refining profits halved as higher crude prices hit margins.
PRODUCTION STALLS
Total said hydrocarbon production was essentially flat at 2.426 million barrels of oil equivalent per day (boepd).
An outage at the North Sea Elgin-Franklin gas field and the impact of production sharing contracts with producer nations, under which companies receive less oil from projects when oil prices rise, balanced higher production in Angola and an output ramp-up at its Dolphin liquefied natural gas plant in Qatar.
Castaigne said he was optimistic of achieving Total's target of 4 percent growth between 2006 and 2010, a target based on oil averaging $60/barrel. If oil prices averaged $100/barrel, growth may be more like 3 percent, the CFO said.
Even 3 percent growth would likely beat most peers.
David Thomas, oil analyst at Citigroup said Total's shares looked cheap compared to rivals like BP and Shell as he believed Total will grow output more quickly but said investors will likely wait for Total to show how it will deliver this growth before rewarding its shareholders.
"We argue Total has better growth prospects ... but fear that relative outperformance may be limited until the growth catalyst becomes clearer," he said in a research note after the results.
Total's stock has shed 4 percent since the start of the year -- roughly in line with the rest of the European energy sector -- hurt by worries that escalating oil prices and cost inflation may make it difficult reach production growth targets.
Total's adjusted result in the first three months compares with an average forecast of 3.183 billion euros from a Reuters poll of 11 analysts.
