Total reports on first quarter financial results

Energy giant Total has released its results for the first quarter of 2015, ended 31 March.

1Q15 highlights

• Adjusted net income: US$2.6 billion (1Q14: US$3.3 billion).
• Net income of US$2.7 billion.
• Net debt to equity ratio of 28.2% at 31 March 2015.
• Hydrocarbon production of 2.395 million boe/d.
• Interim dividend of €0.61/share, payable in October 2015.
• Entered new ADCO concession in Abu Dhabi with 10% interest for 40 year duration, effective 1 January 2015.
• Finalised the sales of Bostik and several onshore blocks in Nigeria.
• Started production from Eldfisk II in the Norwegian North Sea.
• Started production from West Franklin Phase 2 in the UK North Sea.
• Stopped flaring and started producing gas from the Ofon field in Nigeria.
• Announced plans to reduce capacities of the refineries at Lindsey (UK), and La Mede (France) and to modernize the Donges (France) refinery.

“Against a backdrop of lower prices, Total’s first quarter results include a number of significant accomplishments in all segments,” said CEO Patrick Pouyanne.

“In the Upstream, with CLOV producing above plateau, the start ups of West Franklin Phase 2, Eldfisk II and Ofon Phase 2, as well as the entry into the new ADCO concession, Total achieved strong production growth of 10% (4% excluding ADCO), compared to the same period last year. The Group is thus benefiting from its organic growth strategy.

“In Refining & Chemicals we launched restructuring plans for the Lindsey, La Mede and Donges refineries, thereby enabling us to meet the objective of a 20% reduction in European capacity by 2017. Asset sales continued with the completion of the sale of Bostik and several onshore fields in Nigeria.

“While the Brent price decreased by 50% compared to last year, our adjusted net results this quarter were US$2.6 billion, a decrease of 22% over the same period. Total is thus demonstrating its resilience and profiting from its integrated model. In the Upstream, production growth along with the first positive results of the cost reduction programme partially offset lower oil prices. Downstream again generated excellent results due to its ongoing restructuring efforts and improved market conditions in refining and marketing.

“All of our teams are mobilised to reduce costs, lower breakevens and deliver new projects. With our strong balance sheet, we are confident in our ability to adapt and respond to this period of lower prices and schieve out growth targets for the benefit of our shareholders,” Pouyanne concluded.

Upstream segment

Hydrocarbon production was 2.395 million boe/d in 1Q15, a 10% increase compared to 1Q14, due to the following:

• +4% for production from start ups, notably CLOV, Eldfisk II, Ofon Phase 2 and West Franklin Phase 2.
• +3% due to lower prices, notably on production sharing contracts.
• +6% for the new ADCO concession in the UAE.
• -3% due to natural decline.

Adjusted net operating income from the Upstream segment was US$1,359 million in 1Q15, a decrease of 56% compared to 1Q14, essentially due to the lower oil price, partially oddest by production growth and the initial positive results of the cost reduction programme. The Upstream effective tax rate was 60.5%, impacted in particular by the consolidation of ADCO.

Refining & Chemicals segment

In 1Q15, refinery throughput increased by 14% compared to 1Q14, benefiting from lower levels of maintenance in France in 1Q15 as well as the start up of Satorp, at full capacity since August 2014.

The European refining margin indicator averaged a very high level of US$47.1/t this quarter, due to strong product demand, particularly gasoline, and due to a higher level of maintenance, notable in refineries located in the US. Petrochemical margins remained favourable.

Adjusted net operating income from the Refining & Chemicals segment was US$1,100 million in 1Q15, three times higher than in 1Q14. The segment continued to benefit from its restructuring and was able to take advantaged of the higher margins.

Summary and outlook

In the context of the sharp decline in oil prices, Total is pursuing the implementation of its strong response, which includes delivery of its new Upstream projects, a decrease in investments, as significant cost reduction programme that is already bearing fruit and an acceleration of divestments.

In the Upstream, in addition to the three projects that have already started up in 2015, the Termokarstovoye gas field is scheduled to start up in the second quarter, followed by GLNG, Laggan-Tormore, Surmont 2 and Vega Pleyade in the second half of 2015. In the second quarter, production will be impacted by heavy seasonal maintenance activity, mainly in Nigeria, the UK and Norway. In addition, due to the lag effect in contractual formula, gas prices in the second quarter will be further affected by the decreasing oil price.

In addition to the volatility in energy markets, the beginning of 2015 has been marked by rising geopolitical tensions. Due to the deteriorating security conditions in Libya and Yemen, production was halted in February 2015 in onshore Libya and in April 2015 in Yemen. Due to the geographic diversity of the Group’s portfolio, the impact of these events on the Group’s results is limited. The Group’s first priority wherever it is present is the safety of its people and the security of its installations.

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.

Adapted from press release by Rosalie Starling

Read the article online at: https://www.hydrocarbonengineering.com/refining/28042015/total-reports-on-first-quarter-financial-results-675/