Petrotahlil - Total returned to a modest profit in the third quarter, helped by low upstream production costs and a strong performance from its marketing business.
Including inventory effects, the company made a profit of $202mn in July-September. This is 93pc lower than the same period last year when oil prices, production and refining margins were much higher. But it marks a significant improvement on the April-June quarter when hefty impairments dragged the firm to an $8.4bn loss.
Total said it benefited from a more favourable environment than in the second quarter, characterised by an improvement in both oil prices and demand for road fuels. But headwinds persisted, notably "severely depressed refining margins due to excess production capacity relative to demand and high inventories", chief executive Patrick Pouyanne said.
Pouyanne said the third-quarter results highlight the firm's "resilience". Low production costs of $5/bl of oil equivalent (boe) were a key factor that helped to underpin upstream profitability in the face of lower output, he said.
Total's oil and gas production averaged 2.72mn boe/d in July-September, an 11pc fall compared with a year earlier. The decline was driven by "compliance with Opec+ quotas, notably in Nigeria, the UAE, Angola, Kazakhstan and Iraq, as well as voluntary reductions in Canada and disruptions in Libya", the company said. Total has revised its full-year output forecast to below 2.9mn boe/d, down from previous guidance of 2.9mn-2.95mn boe/d, to taken into account "the strict discipline with which Opec+ has implemented quotas and the lack of production in Libya until October 2020", Pouyanne said.
Total's LNG sales jumped by 9pc on the year to 8.1mn t in the third quarter, mostly thanks to an increase in trading activities. The firm said it expects the partial recovery in oil prices since the crash earlier in the year to have a positive impact on its average LNG selling price in the fourth quarter, "which is expected to be over $4/mn Btu".
Total's downstream operations had a mixed quarter. "Refining faced losses while petrochemicals resisted, and marketing and services generated net operating income of more than $400mn, better than in the third quarter 2019," Pouyanne said.
Refinery runs dropped by almost a third from a year earlier to 1.21mn b/d, giving the firm a utilisation rate of just 57pc in July-September. This was mainly because of high inventories of refined products and the drop in demand, Total said. An extended shutdown of a fire-damaged crude distillation unit at the 240,000 b/d Gonfreville refinery in France and hurricane-related disruption in the US also contributed to the drop in throughput.
The firm's refining and chemicals division was loss-making during the third quarter because of "negative refining margins resulting from weak demand, notably for distillates as a result of particularly depressed demand for air transport", Total said. European refining margins remain fragile "given the low demand for jet fuel that weighs on the valuation of all distillates", it added.
Total has kept its quarterly dividend unchanged and has reaffirmed that shareholder distributions at this level are supported in a $40/bl oil price environment, "particularly in view of the results this quarter".
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