Falling oil price cuts TotalFinaElf profits 34% in fourth quarter

Jan. 30, 2002
The falling world oil price has hit the profits of the French TotalFinalElf Group, which said Wednesday its fourth quarter profits were 34% down on the same period last year. However, profits for 2001 of 7.5 billion euros ($6.4 billion) were in line with market expectations and only 2% less than last year.

By the OGJ Online Staff

LONDON, Jan. 30 -- The falling world oil price has hit the profits of the French TotalFinalElf Group, which said Wednesday its fourth quarter profits were 34% down on the same period last year.

However, profits for 2001 of 7.5 billion euros ($6.4 billion) were in line with market expectations and only 2% less than last year.

The oil industry saw fourth quarter prices drop 35% to an average of $19.40/bbl for Brent crude traded on the London International Petroleum Exchange (IPE), compared to an average of $29.70 in the same period of 2000. Prices on the IPE were about $19/bbl Wednesday.

TotalFinaElf, the world's fifth largest publicly quoted integrated oil company, said that during the final quarter of 2001, net income before one-time items fell to 1.41 billion euros ($1.22 billion) from 2.13 billion euros in same period last year. Analysts had predicted profits of 1.07-1.66 billion euros with the result that the company's share price has been largely unaffected.

For 2001, the group operating income from chemicals fell 34% to 1.08 billion euros. Operating income from upstream activities fell by 11%, while refining and marketing profits fell 6%.

The group was formed by the acquisition by Total of Belgium's Petrofina in 1999 and the subsequent merger with Elf. It moved into fourth place in the world oil company rankings, but has been overtaken by the creation of ChevronTexaco Corp.

A spokesman for TotalFinaElf said, "Since the start of 2002, the oil market environment has been significantly less favorable than 2001. Strong production growth projected for 2002 combined with ongoing synergies and productivity programs will enhance the underlying profitability of TotalFinaElf and should limit the impact of a decline in the oil market environment."

TotalFinaElf plans to increase oil and gas production up to 10% this year, largely by bringing on stream its Girassol deep water project off Angola and new projects in the UK North Sea, Iran, and Venezuela.

Analysts say the group's under-performing chemical business needs restructuring. It is the world's second-largest producer of polypropylene used in packaging and employs 58% of the company's workforce, but produces only 20% of sales.

However, analysts suggest that strong French petrochemical trade unions and forthcoming elections in France will make it difficult for TotalFinaElf to reduce staffing in the chemicals business.

The company Wednesday said it intends to sell 1.5 billion euros of chemical assets by 2003, out of total asset sales of about 12 billion euros. The company goal is to improve operating profit at the unit by 300 million euros/year.

The group also plans to extend a share buyback program. Last year it bought 5% of its shares.