Total Q3 Profit Halved, but Better Than Expected

Total SA, Europe's third-largest oil company, reported Wednesday that profits were more than halved in the third quarter, due to a sharp fall in energy prices, but were still somewhat better than expected.

Total posted third quarter adjusted net profit of euro1.9 billion ($2.8 billion), 54 percent below the year ago figure of euro4.1 billion but ahead of the euro1.8 billion that analysts forecast.

Adjusted profit is a key oil industry measure that excludes inventory gains and losses and tax charges and credits.

Total's earnings were on par with the steep drop in third quarter profits already reported by larger rivals Exxon Mobil Corp., Royal Dutch Shell PLC and BP PLC. The industry is struggling to adapt to lower demand and the volatility in oil prices that has seen the price of a barrel spike to nearly $150 last July, then stage a retreat back to around $30 early this year.

Barclays Capital oil and gas industry analyst Lucy Haskins said Total's third quarter production increase was reassuring, and that with new fields starting up this year, "should continue to show improvements into 2010." Haskins rates Total's shares at overweight relative to the oil and gas sector.

During the third quarter, Brent crude averaged $68 a barrel, while on Tuesday oil traded around $77 a barrel.

Experts say prices have not risen solely because of improving demand, but mostly due to the fall in the value of the dollar.

The U.S. currency is used to buy and sell crude, so when it depreciates investors holding euros or other relatively strong currencies can buy more crude.

Last week Shell CFO Simon Henry said there are "few if any signs of demand recovering" in Europe, while the improvement seen in U.S. demand "is not firm enough to call a recovery."

Oil demand in developed countries is forecast to shrink by 4.7 percent this year due to the global economic slowdown, and to grow only 0.1 percent in 2010, according to the International Energy Agency.