French oil and gas major Total reported a 29 percent jump in third-quarter net profit as ramp-ups and new projects lifted production, while high demand for petroleum products led to a sharp increase in its refining margin.
Total’s oil production rose 6 percent in the quarter, while adjusted net operating income from its upstream exploration and production branch soared 84 percent compared with the same period a year ago, buoyed by a rise in the Brent oil price.
“The group took full advantage of the favorable environment thanks to the performance of its integrated model and its strategy to reduce its breakeven point,” Chief Executive Patrick Pouyanne said in a statement.
Net adjusted profit for the quarter hit $2.7 billion, in line with a Reuters poll of analysts forecast.
Production increases in projects such as Kashagan in Kazakhstan, Moho Nord in Republic of Congo and Angola LNG, as well as new concessions such as Al-Shaheen in Qatar, contributed to the 2.581 million barrels of oil equivalent output per day.
Total maintained its annual production growth target of around 5 percent in 2017, which is expected to remain steady at that level until 2022.
In the downstream segment, Total said its European refining margin indicator rose sharply to $48.2 per tonne in the third quarter of 2017 compared with $41.4 in the third quarter of 2016 thanks to strong demand for products after last month’s hurricane Harvey led to numerous shutdowns of refining capacity.
“The downstream benefited from favorable refining margins and increased its results by 18 percent compared to the second quarter, despite the impact of Hurricane Harvey on American operations,” Pouyanne said.
Total said cost reductions for 2017 will be more than $3.6 billion, above a $3.5 billion target, as it continued to drive down costs such as reducing the number of expensive contractors in places like Nigeria and Angola.
The company said its cost of production dropped below $5 per barrel during the past three months, ahead of the target of $5.5 per barrel for the year.
It reiterated a target of $5 billion in savings by 2020 while pursuing efforts to reduce its breakeven point.
Total’s pre-dividend organic breakeven — excluding acquisitions and divestments — is expected below $30 per barrel this year, and should continue to fall to $20 in 2019.
France's Total third-quarter net profit lifted by strong output and cost savings