Total's refining and chemicals unit limits decline in earnings

A tripling of net income at Total's refining and chemicals unit helped the oil and gas major beat analysts' expectations and offset the crippling effect of the 50 per cent fall in oil prices in its first-quarter results.

The French group reported an adjusted net income of $2.6bn, down 22 per cent from the same period last year, hit not only by lower energy prices but also the depreciation of operations in Yemen and Libya for security reasons.

But declines were cushioned by the group's refining and chemicals unit, which benefits from a lower oil price. Here adjusted net income more than tripled to $1.1bn, helped also by restructuring and cost-cutting efforts.

Patrick Pouyanne, the chief executive, said in a statement on Tuesday that Total was "demonstrating its resilience and profiting from its integrated model" and adding that the group was also benefiting from its "cost reduction programme".

Total earlier this year announced plans to to reduce group-wide capital spending by 10 per cent this year and speed up billions of dollars in asset disposals in order to cope with lower energy prices.

A cost-saving programme includes a hiring freeze, cutting 2,000 jobs in marketing and services and a 15 per cent reduction in corporate staff through 2017. The company also plans $10bn of asset sales.

This comes as global crude prices have nearly halved since June to trade at about $64 a barrel, as a result of weaker growth in demand for oil, booming US shale production and Opec's decision in November not to cut output.

For the first-quarter, Total's results were also helped by a 10 per cent increase in output to the equivalent of 2.395m barrels of oil a day, in part due to a new concession in the United Arab Emirates.

The company wrote down the value of assets in Libya and Yemen due to "deteriorating security conditions," but also benefited from the sale of assets, including Bostik, the adhesive group, and several offshore fields in Nigeria.

The company said that margins in refining and petrochemicals were strong in the second quarter "despite the structural overcapacity in Europe, which will weigh on the margins in the medium term."

Sales fell 30 per cent to $42.3bn in the quarter. The group said it was maintaining its dividend at €0.61 a share. The total $2.6bn net income was ahead of the $2.2bn expected by analysts.

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