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Total's Q3 oil and gas output hits record high in 'volatile' environment

Highlights

LNG-linked gas output jumps 46%

Oil output up 7% on West Africa projects

Firm margins offset refinery downtime

  • Author
  • Nick Coleman
  • Editor
  • James Burgess
  • Commodity
  • Natural Gas Oil

London — Total's oil and gas production hit a record-high 3.04 million b/d of oil equivalent in the third quarter, up more than 8% on the year, with a 46% jump in gas output for LNG production.

As with other big producers, Total's profits were hit by lower prices for its upstream production. They were also dented by depreciation, depletion and amortization of newly producing projects.

"The environment remains volatile, with uncertainty about hydrocarbon demand growth related to the outlook for global economic growth and in a context of geopolitical instability," Total noted in a results statement.

It reiterated it is able to break even at oil prices below $25/b, excluding dividend payments.

"The group continues to high-grade its portfolio," CEO Patrick Pouyanne said, referring to Total's upstream division.

Total's adjusted profit was down 24% at $3.02 billion, while its net debt ratio, or gearing, was up half a percentage point compared with the end of the second quarter, at 21.1%, it said.

However, the company noted half its gas production had been priced with a link to oil prices, providing some cushion against recent gas market weakness.

In the upstream, adjusted profits were down 29% at $1.73 billion, while its downstream segment was buoyed by strong refining margins, offset by maintenance at its Normandy refinery and repairs to a pipeline at its Grandpuits refinery that lasted into July.

PRODUCTION OUTLOOK

The surge in Total's upstream oil and gas production followed 9% year-on-year growth in both Q1 and Q2, and the company affirmed plans for an overall increase of 9% in 2019. It expects its output to grow by 5%/year on average in 2018-21, followed by a flattening in 2022-23 and then further increases.

Total's oil output was up by 7% on the year, at 1.72 million b/d, on the back of projects such as Egina, offshore Nigeria, and the Kaombo field offshore Angola, which came on stream in July last year and is now producing from two floating production, storage and offloading vessels. A further boost should come from the expected start of oil production in Brazil's sub-salt Iara area this year.

The company's gas production increased by 13% to 7.40 Bcf/d. Out of this total, gas production within its LNG division increased by 46% to 2.75 Bcf/d, reflecting rising volumes from the Yamal LNG project in northern Russia, operated by Novatek, and Ichthys, offshore Australia. Its LNG sales were up 20% at 7.4 million mt and sales from its own production were up 50% at 4.2 million mt.

In the downstream, Total's refining throughput was down 12% on the year at 1.72 million b/d, with a 23% drop in France due to work at the Normandy and Grandpuits facilities. But firm margins meant adjusted operating profit from refining and chemicals was up 1% at $952 million.

The company's return on average capital employed for the 12 months to the end of September was 9.6%.

-- Nick Coleman, nick.coleman@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com