Total’s quarterly profit beats estimates on oil output, refining

Oil producers including BP Plc and Royal Dutch Shell Plc have stuck doggedly to their dividends, cutting operating costs and investments to free up cash for shareholders as the price plunge dents earnings.

LONDON-The oil price will likely be higher at the end of this year as an increase in demand will reduce the current production over-capacity, Total SA’s TOT, -1.10% Chief Executive Patrick Pouyanné said on Thursday. On an adjusted basis, stripping out one-time charges such as write-downs and oil-price effects on inventories, the company notched up profit of $2.08 billion in the quarter. Brent crude, the benchmark for global oil, hit a 12-year low of $27.10 a barrel in January.

Pouyanne told investors that an exploration budget of $1.5 billion in 2016 will start delivering results following discoveries in Myanmar and Brazil.

“The resilience in a degraded environment demonstrates the effectiveness of the group’s integrated model and full mobilisation of its teams”. If crude stays at $30 to $40 a barrel, Total will continue to offer a dividend in shares – a scrip payout – in 2017, Pouyanne said on a conference call.

Nevertheless, investors were unimpressed, and Total’s shares fell as much as 3.3 per cent to €35.31 in Paris today.

Total said it plans savings of $2.4 billion (£1.66 billion), rising to more than $3 billion in 2017, and capital spending of around $19 billion in 2016, down more than 15 percent from 2015.

From 2017, the figure will then fall to 17-19 billion. Total was among several European oil and gas companies assigned a negative outlook by Standard & Poor’s this month as the market rout continued.

Total said on Thursday that it did not plan to cut jobs. The impact on Total will be “very negligible” since the market has already priced in the higher cost of credit amid crude’s collapse, he said. Oil and gas output in the fourth quarter rose 5.5 percent to 2.352 million barrels of oil equivalent per day.