3rdUPDATE: Total Warns Output Will Be Dented By Leaks, Yemen
04/27/2012| 01:00pm US/Eastern
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Oil major Total SA's (TOT, FP.FR) acknowledged Friday that it may fall short of production targets for 2012 following recent outages, as the company reported a slight drop in earnings in the first quarter.
Total continues to work to address a gas leak at the Elgin field in the North Sea that has forced it to curtail oil output. The company has also been hit by an outage in Nigeria and by a recent strike by rebels on a pipeline in Yemen.
"If we take the conservative view that Elgin-Franklin does not restart before year-end, output could be flat in 2012," the group's Chief Financial Officer Patrick de la Chevardiere said during a conference call.
Total saw shares plummet last month when workers were evacuated and investors initially worried that the incident might be similar to the Gulf of Mexico Macondo oil spill that took months to stop and caused pollution, costing Total's U.K. peer BP PLC (BP.LN) billions of dollars.
The group also experienced a similar leak at one of its Nigerian installations, with a loss of 20,000 barrels of hydrocarbons per day. The Nigerian situation is under control, but the output remains off-line, company officials said.
Total's Yemen gas installation were attacked at the end of March with the group losing five cargoes of liquefied natural gas. The average output in Yemen was 90,000 barrels of oil equivalent per day during the first quarter, de la Chevardiere said. Another attack occurred Thursday night. No detail on the impact was available.
"There are risks to the (output) growth profile for 2012," Bank of America Merrill Lynch's analyst Hootan Yazhari said. He rates Total at neutral. In the near term, there's nothing Total can do to compensate the loss in production, Yazhari said.
The group maintains though its objective of a 2.5% annual growth on average of its output between 2012 and 2015, de la Chevardiere said. A spokesman said the guidance allowed for year-to-year fluctuations.
Adjusted net income, an earnings benchmark that strips out non-performance-related inputs that is closely watched by investors, was EUR3.07 billion, down from EUR3.1 billion last year and matching expectations of analysts polled by Dow Jones Newswires.
Net profit for the period was down 7% at EUR3.66 billion compared with EUR3.95 billion a year earlier.
The shares closed flat at EUR36.50, recouping all their losses of the day.
The quarterly output was boosted by the increase in its revived production in Libya, the ramp-up of Pazflor and Usan oilfields and the purchase of an additional stake of 2% in Russia's Novatek (NVTK.RS). But this increase was partially limited by the loss of Syrian oil and the share of its output from CEPSA after Total sold its stake in the Spanish oil company in February last year.
Output was marginally up at 2,372 million barrels of oil equivalent per day, from 2,371 mboe/d a year earlier and missed analysts' expectations of 2.378 mboe/d.
The 2012 planned start-ups include Sulige in China and the Angolan liquefied natural gas project, but "production in the second quarter of 2012 will be impacted by the incidents in the U.K., in Nigeria and in Yemen, as well as scheduled seasonal maintenance," Total warned.
The group didn't provide any outlook for the rest of the year or give any costs so far for the Elgin leak. However, a spokesman later said the loss of income and costs of response operations is now "around $2.5 million per day."
In spite of these costs, there is still room to increase the dividend, de la Chevardiere said, as Total will pay a EUR0.57 per share remainder of the 2011 dividend on Jun.21 and plans to pay an interim dividend of EUR0.57 per share for 2012 to be paid on Sep.27.
Total is working on two options to stem the leak: a top kill job of the leaking well, from the platform, and the drilling of two relief wells.
In Nigeria, the group plans to dig a relief well following a leak during the drilling of a new well in Rivers state, forcing the group to shut down its Obite gas plant in the south of the country.
Total's investment program saw EUR136 million spent in the first quarter, up 49% from a year earlier and its plans to invest an average net $23 billion a year from 2012 to 14, mostly focused on exploration and production. As for its disposal program, Total has maintained its target of $4 billion of asset sales this year, de la Chevardiere said.
Regarding the downstream activities, the group's performance was crimped by the weakness in refining margins, with sales down 19% to EUR1.74 billion from EUR2.15 billion a year earlier.
- By Geraldine Amiel, Dow Jones Newswires; +33 1 40171767; geraldine.amiel@dowjones.com
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