French oil major Total posted lower profit for the second quarter of the year despite increase in production and revenues as it looks to further cut costs.
The company recorded a net income for the second quarter 2017 of $2.03 billion, a decrease when compared to the second quarter of 2016 and net income of $2.12 billion.
On the other hand, the company’s revenues for the second quarter of this year increased to $39.9 billion from $37.2 billion in the corresponding period of 2016.
Hydrocarbon production in the second quarter 2017 was 2,500 thousand barrels of oil equivalent per day (kboe/d), an increase of 3% compared to the second quarter 2016, due to project ramp ups, notably Kashagan, Moho Nord, Incahuasi, Surmont and Angola LNG, acquisition of an additional 75% interest in the Bamett shale in the United States and asset sales in Russia and Norway, improved security conditions in Libya and Nigeria, offset by natural field decline, the PSC price effect and OPEC quotas.
Total achieved a 9 percent increase year-over-year in average crude oil price.
The exploration & production segment’s adjusted net operating income was $1.359 billion in the second quarter 2017, an increase of 30% compared to the second quarter 2016, notably due to production growth, cost reduction, and the increase in oil and gas prices.
Adjusted net operating income for the gas, renewables & power segment increased to $95 million in the second quarter 2017, notably due to the contribution of gas activities.
Total CEO Patrick Pouyanné commented: “In a price environment that remains volatile, Total again delivered an excellent set of quarterly results with adjusted net income of $2.5 billion, a 14% increase compared to a year ago, and operating cash flow before working capital changes of $5.3 billion, a 33% increase, while Brent only increased by 9%.”
Pouyanné continued: “In the Exploration & Production segment, second quarter 2017 operating cash flow before working capital changes increased by almost 50% compared to the same quarter last year, benefiting from production growth of more than 3%, driven by start-ups and ramp-ups of new cash-accretive projects, as well as the cost reduction program, which continues to be implemented with determination.”
Oil prices remain volatile
According to the company, oil prices remain volatile at the start of the third quarter, in a context of ongoing high inventory levels. In this uncertain environment, the group’s strong financial performance confirms the success of its strategy to reduce its breakeven point and grow its cash flow, the company said.
The company also said that, in the Upstream, annual production growth should be more than 4% in 2017, supported by the start-up in mid- July of operations on the A1-Shaheen field in Qatar and the continued ramp-up of new projects, notably Kashagan in Kazahkstan and Moho Nord in Congo. Production from Moho Nord started in March 2016.
Start-ups of new projects will continue in the second half, mainly with Libra Pioneiro in Brazil and Edrad0ur-Glenlivet in the United Kingdom.
Total emphasized it is continuing to relentlessly pursue its efforts to reduce the cash breakeven. The good results of the cost reduction program allow it confirm its announced objective of 3.5 B$ for 2017, and the decrease of production costs to 5.5 $/boe in 2017 and then to 5 $/boe in 2018. Organic investments for the year should be between 14 and 15 B$, which allows the Group to sustain its growth.
Offshore Energy Today Staff