Total SA said Wednesday that the recent slide in oil prices damped its third quarter earnings and could hurt its results for the rest of the year, as the French oil major recovers from the sudden death last week of its Chief Executive Christophe de Margerie. Total said adjusted net profit fell 2% in the third quarter to $3.56 billion as the average price of the key Brent crude oil benchmark over the period fell by 8%. Total warned that earnings would likely deteriorate further in the fourth quarter, with oil prices already down 11% since the end of September. Patrick de la Chevardière, Total's chief financial Officer, said the company loses about $1.5 billion of net profit for every $10 decline on the Brent oil. "We will maintain our strict discipline regarding costs of investments and operations given the...less favorable context," Mr. de la Chevardière told reporters. He said a good performance from the company's refining business partly offset the crude price shock during the three-month period through September. The unexpected oil price slide over the past few weeks is a particular challenge for Total's new CEO Patrick Pouyanné who took over less than a week ago after Mr. de Margerie died in a plane crash in Moscow. Mr. de la Chevardière said one of Mr. Pouyanné's top priorities would be to work on the company's budget for next year. The oil price decline led to a 10% fall in operating profit at Total's upstream division, which comprises oil and gas exploration and extraction, and contributes 70% to Total's operating income. Total has been struggling to launch new projects to replace aging fields. Still, Mr. de la Chevardière said he expects the company's average daily output to rise to 2.2 million barrels of oil equivalent a day by the end of the year as a major project in Angola starts working at full steam, up from 2.12 million barrels in the third quarter. He reiterated the company's target of 2.3 million barrels a day output in 2015. Total is also grappling with the difficult geopolitical situation in Russia, where it made heavy bets during Mr. de Margerie's tenure. Western sanctions imposed earlier this year on Russia have already delayed the financing of its $27 billion Yamal liquefied natural gas project in the Arctic Ocean, Mr. de la Chevardière said, though he said the project is still on track. Total and its partners are negotiating with Chinese and Russian lenders and European export credit agencies and will close the financing for Yamal by next March, he said. Source: MarketWatch
