Oil
Total’s Profit Dented by High Costs, Falling Refining Margins
PARIS — Total SA was hit by the same mix of declining refining margins and high exploration costs that have slammed its European peers in the fourth quarter, causing its earnings to slide.
The French oil major said on Wednesday that fourth-quarter net profit totaled €1.61 billion ($2.18 billion), down 31% from €2.34 billion a year earlier. When adjusted for changes in inventories, the figure dropped 19% to €2.47 billion from €3.04 billion, below the expectations of nine analysts polled by The Wall Street Journal.
Total’s oil and gas output has been dented by geopolitical disruptions and technological hurdles. Weak refining conditions in Europe—where margins have dropped due to lower consumption and mounting competition from cheaper refiners in the U.S. and Middle-East—are also biting into operating income.
During the quarter, the company’s hydrocarbon output fell to 2.28 million barrels of oil equivalent a day, from 2.29 million barrels a day a year earlier. Total attributed the decline to labor conflict at Libyan terminals, illegal tapping into pipelines in Nigeria and the false start of the giant Kashagan oil field in Kazakhstan, on which high hopes of a substantial output contribution have been pinned.
Total’s rivals have also been hit hard by high costs and weak refining conditions in Europe. Royal Dutch Shell RDSB.LN -0.79% PLC last month posted a sharp fall in fourth-quarter profit, with production down 5% from a year earlier. Earlier in February, BP BP.LN -0.80% PLC recorded a 25% fall in quarterly profit, hit by lower refining margins and lost income from asset sales.
Chairman and Chief Executive Christophe de Margerie said Total was doing better than its peers.” We cannot control the industry environment, but we can react better than our competitors—it’s a good benchmark,” he told reporters in Paris.
Total said its board of directors has proposed changes to the company’s bylaws that would allow Mr. de Margerie, who turns 63 on Aug. 6, to keep his job as CEO beyond 2016. The board proposed increasing the age limit to 67 from 65 for the CEO and to 70 from 65 for the chairman. The amendments will be submitted to shareholders at Total’s annual meeting on May 16.
As demand for oil and gas keeps increasing, mostly in energy-hungry emerging markets, major oil companies are locked in a fierce battle for new resources. Total set up an ambitious investment plan in 2011 to find additional reserves, but the program has yet to bring in new streams of revenue.
Total still expects exploration efforts will lead to results, Mr. de Margerie said. He mentioned encouraging signs in Argentina, Gabon and elsewhere.
Total on Wednesday reiterated its target to boost production to 2.6 million barrels of oil equivalent a day in 2015 and about 3 million barrels a day two years later.
The company is seeking to increase its output by 3% a year, on average, between 2011 and 2015. But for 2013, production was flat—far from the 2% to 3% targeted by Mr. de Margerie.
Total started its long-term investment plan ahead of most of its rivals and said last year it would cut exploration expenses by 2017. The company reiterated it expects capital expenditure to fall to $26 billion in 2014 from $28 billion last year.
It also announced an interim dividend of €0.61 a share per quarter, up from €0.59 a share.
The output target as well as the reduction of capital expenditure is an encouraging sign for the company, Bernstein equity analyst Oswald Clint said Wednesday. The higher dividend offset the negative effect of the weak earnings, said John Rigby, an equity analyst at UBS.
Total plans to sell between $15 billion and $20 billion of noncore assets by 2014 under an existing plan to help boost its cash flow and foster its investment plans, which are set to decrease after this year. At the end of January 2014, the company had sold a total $14 billion worth of assets. Mr. de Margerie said the company plans to sell $5 billion worth of assets after 2014.
To avoid adverse effect currency swings have on its earnings, Total will report earnings in dollars starting next quarter.
– WALLSTREET JOURNAL
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.
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