French oil major Total SA (TOT) said Wednesday that profit for the third quarter plunged from the prior-year period, as spot gas prices and refining margins reached very low levels, reflecting sharp decline in demand and the resulting oversupply.
In the third quarter, Brent price averaged 68.1 $/b, down 41% from the year-ago period. TRCV European refining margin indicator in the quarter fell to 6.6 $/t on average, a decrease of 85% compared to the third quarter last year.
The company, which also produces fertilizers and petrochemicals, reported net earnings for the third quarter of EUR 1.98 billion or EUR 0.86 per share compared with EUR 3.15 billion or EUR 1.36 per share in the prior-year quarter.
On an adjusted basis, net earnings plunged to EUR 1.87 billion or EUR 0.84 per share from EUR 4.07 billion or EUR 1.81 per share last year.
Adjusted results exclude an after-tax inventory effect, special items, and the company's equity share of adjustments and selected items related to Sanofi-Aventis. Total said its share of adjustments and selected items in connection with Sanofi-Aventis had a negative impact of EUR 70 million on the quarter's net income.
On an average, three analysts polled by Thomson Reuters expected the company to earn US$1.19 per share for the quarter. Analysts' estimates typically exclude special items.
Euro-dollar exchange rate averaged 1.43 $/€ in the quarter compared to 1.51 $/€ in the comparable period prior year.
The company's sales for the quarter dropped to EUR 33.63 billion from EUR 48.85 billion in the third quarter of fiscal 2008. Total SA operates through three segments: Upstream, downstream, and chemicals segments.
Adjusted net operating income from upstream segment dropped 48% to EUR 1.50 billion from EUR 2.90 billion in the prior year. Hydrocarbon production for the quarter was 2,243 thousand barrels of oil equivalent per day, up 0.5% from the previous year. The company said its production is back on track in the upstream segment, and that the division is continuing to actively implement cost reduction programs targeting its fixed costs and projected cost of its investments.
Adjusted net operating income from downstream segment plunged to EUR 146 million from EUR 901 million in the 2008-year period. Total said that in the downstream segment, refining faces a very difficult environment, and that it is working to reduce costs and restore the profitability of the activity.
In this segment, refinery throughput for the quarter declined 10% to 2,142 kb/d from 2,393 kb/d in the previous year, with France throughput declining 18%, rest of Europe decreasing 11%, while rest of the world increasing 27%. Scheduled turnarounds and voluntary throughput reductions in the quarter reduced utilization rate based on crude and other feedstock to 82% from 92% in the prior-year period, the company added.
Adjusted net operating income from chemicals division was EUR 161 million versus EUR 263 million in the third quarter of 2008. Total noted that environment for chemicals segment continued to be affected by weak demand in Europe and North America.
In the preceding second quarter, Total had reported a net income of EUR 2.22 billion, down from EUR 4.88 billion in the previous year. The company's second quarter sales had declined 35% to EUR 31.43 billion from EUR 48.20 billion in second quarter of fiscal 2008.
For the nine-month period, Total's net income plummeted to EUR 6.52 billion or EUR 2.85 per share from EUR 11.73 billion or EUR 5.06 per share in the previous-year period. Adjusted net income was EUR 5.70 billion or EUR 2.55 per share versus EUR 11.05 billion or EUR 4.91 per share last year. Year-to-date sales slumped to EUR 95.10 billion from EUR 141.26 billion in the 2008-year period.
The company has reduced its gearing in the quarter to 20.8% as of September 30, 2009 from 24.7% at the end of June, but it remains higher than 15.4% on September 30, 2008.
Regarding the current trading scenario, the company said that since the start of the fourth quarter, the dollar has continued to fall against the euro, while oil prices have continued to rise, lifted by expectations for an economic recovery, the onset of the winter heating season in the northern hemisphere and the perception of a tight supply-demand balance in the medium term. However, Total cautioned that it has to maintain voluntary throughput reductions, as European refining margins remain at very weak levels, despite modest improvement in diesel margins.
Among peers, British oil giant BP Plc (BP, BP.L) reported last week a 33.7% fall in profit for the third quarter, as a 7% growth in production was offset by lower oil and gas prices. Third-quarter profit attributable to BP shareholders was $5.34 billion or 28.18 cents per share, compared with $8.05 billion or 42.56 cents per share last year. On American Depository share, or ADS basis, quarterly profit was $1.71 per basic share, lower than prior year's $2.58 per basic share. Total revenues and other income for the quarter declined to $67.86 billion from $104.83 billion in the year ago quarter.
Another competitor Exxon Mobil Corp. (XOM), too, reported a plunge in its third-quarter profit, impacted by lower commodity prices and weak product margins. The Irving, Texas-based company's third-quarter net income attributable to the company plunged to $4.73 billion or $0.98 per share from $14.83 billion or $2.85 per share in the same quarter last year. Total revenues and other income plunged nearly 40% to $82.26 billion from $137.74 billion in the prior year quarter.
In Tuesday's regular trading session, TOT closed trading on the New York Stock Exchange at $60.80 per share on a volume of 3,705 shares. In the past 52-week period, the shares have been trading in a range of $42.88 to $64.65.
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