French oil giant Total SA on Friday said 2012 has begun favorably and that it will step up investments over the next three years after it reported a 12.8% increase in fourth-quarter net income on high oil prices and in spite of weak downstream markets and stable output.
The group plans to invest a net $20 billion in 2012, after having invested $22.2 billion in 2011, which was 40% higher than 2010. The company's management forecast annual investment of $23 billion in 2012-2014 as it expects oil prices to remain elevated due to expected high demand levels and falling spare output capacity.
Total confirmed it targets a 2.5% increase in average annual output in 2012-2015, and Chairman and Chief Executive Christophe de Margerie told a press conference that the increase may be close to 3% in 2012, depending on the recovery in Libyan production.
Total reported fourth quarter net profit of €2.29 billion ($3.04 billion), up from €2.03 billion a year earlier. The group's adjusted net income, an earnings benchmark that strips out non-performance-related inputs that is closely watched by investors, came in slightly above expectations.
Total's quarterly revenue came in at €47.49 billion, up 18.2% from the year-ago quarter.
"In a period of economic slowdown, ongoing tensions on the global oil supply supported the Brent price above $110 a barrel in 2011. This environment has been favorable for the upstream, but it was difficult for the downstream activities, notably in Europe," Mr. de Margerie said, adding that 2012 started favorably for the company.
Analyst Dominique Patry from Cheuvreux said the results were in line with expectations, as was the €0.57 quarterly dividend. The exploration and production business performed better than expected, though the chemical business underperformed expectations, Mr. Patry said.
In the European afternoon, shares in Total were trading down 1.1% at €40.71 while the CAC-40 benchmark index was down 1.3%.
The group's hydrocarbon output was stable in the last quarter of 2011 from a year earlier, at 2.384 million barrels of oil equivalent per day, from 2.387 mboe/d a year earlier.
Total had seen its 2011 oil output limited by the Libyan outages, but output from the North African country has been coming back and other big projects, such as the ramp-up of the Pazflor deep-offshore Angolan field, has also contributed to higher volumes.
In 2012, output is expected to grow 2%-3%, depending on evolution of the situations in Libya and Syria, Total said.
But the lack of further detail on output projections is a disappointment for investors, said Alphavalue trading firm's analysts, who rate the company at "reduce."
Total, Europe's third-largest oil company, said the year started favorably for the upstream business, due to continued high oil prices, while it noted that refining margins improved "appreciably" after a sharp fall in 2011. Earnings for European and U.S. oil majors have been badly hit by weak refining in the most recent quarter.
Around 80% of the group's investments will be focused in exploration and production, Chief Financial Officer Patrick de la Chevardiere said.
The company's efforts on exploration is paying off, as its replacement rate of proved reserves was 185% in 2011. Cheuvreux's Patry said this good replacement rate was reached mainly through acquisitions.
Global demand for oil rose by 600,000 barrels a day in 2011, while the spare oil output capacity fell to 3% of the global capacity, down from 5% in 2010 and 6% in 2009, Total said.
(Source: Wall Street Journal)