Oil prices fuel TotalFina profits

europe.cnn.com Thursday, February 20, 2003 Posted: 0809 GMT

PARIS, France (Reuters) -- French oil group TotalFinaElf posted a 13 percent rise in underlying fourth quarter profit on Thursday, fuelled by higher crude oil prices.

But Chief Executive Thierry Desmarest said oil prices would ease from their highs around $37 a barrel after a possible war in Iraq and that would give breathing space to a fragile world economy as supplies catch up with global demand.

"I think unfortunately there is going to be a war, but after that things should ease up because there is enough supply to meet demand globally,'' he said in an interview with television channel France 2.

Oil prices are near 29-month highs as the United States and Britain seek support for a possible attack on Iraq.

Desmarest was speaking after TotalFinaElf predicted a five percent rise in the company's own output each year through 2007.

It is shortening its name to Total and is seen as France's top contender for Iraqi deals if and when sanctions are lifted.

But he denied the name change was motivated by a wish to distance itself from a scandal surrounding former top managers at Elf Aquitaine, which it took over in the late 1990s.

The world's fifth largest oil company's unwieldy name had come to symbolise the merger boom of the 1990s as it bought Elf and another medium-sized oil company, Belgium's Petrofina.

TotalFinaElf, France's largest company, said its net income before exceptional items rose to 1.609 billion euros ($1.73 billion) in the fourth quarter from 1.424 billion a year ago.

Continuing share buybacks boosted pre-exceptional earnings per share to 2.44 euros from 2.11 previously, and Total said it would propose a net dividend of 4.10 euros for 2002, up eight percent from 2001 .

The results were slightly below analysts' expectations of net income before one-time items of 1.65 billion euros for the quarter, but analysts called the figures solid and said investors would be pleased its production targets.

"At first glance Total's net profit was slightly light but this was partly due to write-downs on Argentinian assets. Its EBIT was in line with our expectations, its share buy-back continues and it gave encouraging production targets,'' said one London-based energy analyst.

The company's oil and gas production rose eight percent in 2002's last quarter to 2.532 million barrels of oil equivalent per day, despite lengthy strikes in Venezuela.

This was in stark contrast with some of the oil majors like BP who failed to deliver on production targets last year.

Paris equity traders said Total could however suffer a double hit from lower oil prices and the weakening the U.S. dollar, the currency on which oil transactions are based.

"What worries people is the dollar exchange rate. Lower oil prices would be one thing for Total, but lower crude prices and a simultaneous further weakening of the dollar would be disastrous for the company,'' said one trader.