July 29, 2011 / 6:23 AM / 7 years ago

Oil majors Total and Eni hit by weak dollar, Libya

PARIS/MILAN (Reuters) - French and Italian oil majors Total SA (TOTF.PA) and Eni SpA (ENI.MI) reported lower second-quarter profits on Friday, reflecting dollar weakness and production outages partly due to fighting in Libya which shut some fields.

Total said second-quarter net income, excluding one-offs and non-cash gains due to changes in the value of fuel inventories, fell 6 percent from the same period last year to 2.79 billion euros ($4 billion), just below the 2.85 billion average forecast in a Reuters analysts poll.

Eni’s underlying net profit fell 14 percent to 1.44 billion euros compared with an average forecast of 1.65 billion, as Libyan outages pushes its production down 12 percent to 1.49 million barrels of oil equivalent per day (boepd).

A 13 percent dip in the dollar hit both companies as the price of the crude they produce is denominated in the U.S. currency.

In dollar terms, Eni’s net income fell only 2 percent and Total’s underlying result was up 7 percent, performances that still paled in comparison to those of bigger rivals Royal Dutch Shell (RDSa.L) and Exxon Mobil (XOM.N), which posted profit rises of 56 percent and 41 percent respectively.

Even at Norway’s Statoil, the rise was 39 percent.

Total shares traded down 1.8 percent at 37.65 euros by 1100 GMT (7 a.m. EDT) in Paris, wiping more than 1.5 billion euros of its market value, while Eni shed 1.1 percent to 15.21 euros in Milan.

The European oil and gas sector .SXEP fell 1.1 percent.


“The earnings miss against the consensus ... was notable because it is so rare at Total, which is so consistent,” UBS analyst Jon Rigby said in a note, while CA Cheuvreux analyst Jean-Charles Lacoste called Eni’s update disappointing.

Total lost around 2 percent of oil and gas output, despite the acquisition of a 12 percent stake in Russian gas company Novatek NOTK.MM, as the Libyan conflict and maintenance downtime in North Sea fields pushed overall production to 2.31 million barrels of oil equivalent per day.

This highlighted the difficulty for Western oil companies to match natural field decline with new finds.

Total has spent billions of euros in recent months to build up its presence in energy-rich countries such as Russia, Canada, Brazil or Australia, but it has yet to fully benefit from this investment.

The start-up of the 220,000 barrel per day Pazflor field offshore Angola should contribute “substantially” to near-term output growth, while major gas projects in Australia and Russia will bolster production at a later stage, the French group said.

It targets 2 percent average annual output rise in 2010/15.

Meanwhile Eni predicted a 10 percent drop in hydrocarbon production from 1.82 million boepd in 2010, a fall stemming from the near complete shutdown of operations in Libya, where Eni is the biggest foreign operator.

Eni said it could quickly restart output at its Libyan fields when the fighting there ended, as no damage had been reported to its facilities — echoing comments on Thursday from Spanish rival Repsol (REP.MC), which also has large operations in the North African country.

Total, Europe’s largest refiner by capacity, also reported lower profits from its refining division due to weak crude processing margins. The so-called downstream business saw adjusted net operating income fall 59 percent year on year.

Total shut the Gonfreville refinery in France and sold its stake in Cepsa CEP.MC earlier this year as part of a move away from the low-margin European refining sector. It has also been in talks for at least 18 months to sell its Lindsey refinery in Britain.

Writing by Tom Bergin; Editing by David Holmes

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