Total produces record annual profits

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Thierry Desmarest on Wednesday ended his 12-year term as executive chairman of Total, the French oil major, by announcing record annual profits and boosting medium-term forecasts for production growth to one of the highest rates in the industry.

Mr Desmarest, who on Wednesday stepped up to become chairman of the supervisory board, said production growth to 2010 would exceed 5 per cent, up from previous forecasts of 4 per cent.

The surprise increase – which will see Total producing close to 3m barrels a day by 2010 – follows downgrades in recent weeks from fellow majors Shell and BP over the same period and confirms the group’s return to production growth.

“The bears haven’t been able to speak today,” said Irene Hirmona, oil analyst with BNP Exane.

After a disappointing production decline of 5 per cent in 2006, due to political problems in Nigeria, and a downgrade from 7 per cent to 6 per cent this year, “Total is entering a period of very, very material organic growth,” she said.

The group said its replacement rate for proved reserves stood at 102 per cent in 2006 and was 127 per cent for its proved and probable portfolio.

But Total’s obvious success failed to impress at home, with its €12.6bn ($16.5bn) net profit for 2006 attracting strong criticism and calls for a new windfall tax on the country’s most profitable company.

Total is currently facing trial for its role in the disastrous Erika oil spill of 1999 and investigations into alleged bribery and corruption in Iran, Iraq and Cameroon.

Mr Desmarest defended the group’s position, saying there was no basis to any of the allegations.

Christophe de Margerie, who took over Wednesday as chief executive and who is the subject of certain inquiries, said he was confident there had been no transgression and he would not be hindered by the investigation from carrying out his duties.

Mr de Margerie said Total intended to pursue its programme of organic growth, rather than acquisitions that at current oil prices were more expensive.

To spur that growth the group had invested $13.9bn in 2006, excluding acquisitions.

Net income for 2006 from exploration and production rose 8 per cent to €8.7bn, while the refining and marketing division fell 5 per cent to €2.88bn.

The chemical division, delivered €884m, a 9 per cent decline.

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