PARIS— Total SA said aggressive cost-cutting and an increase in oil output helped offset the fallout from lower crude prices on its bottom line, as its net profit fell by less than expected in the second quarter.
The French oil company’s strategy for stubbornly low oil prices has been similar to other major energy companies: extract as much oil and gas from current operations while cutting back aggressively on all costs and reducing investment in long-term projects. Along with boosted revenue from units like refineries and petrochemical plants—which do well when prices are low—Total, like other majors, has shown signs of resilience in the face of a historic market collapse.
Total said Wednesday its net profit fell 4% to $2.97 billion in the second quarter from a year earlier, while revenue contracted 29% to $44.72 billion. When adjusted to exclude the effect of inventories and other nonrecurring items, the company’s net profit fell to $3.09 billion from $3.15 billion in the same quarter a year earlier.
The adjusted profit data was higher than the $2.75 billion median forecast of eight analysts polled by FactSet.
Profit would have fallen much more if Total hadn’t scrambled to raise output to an average 2.3 million barrels of oil equivalent a day in the second quarter, from 2.05 million barrels a day in the same period a year ago, the company said.
The company now pumps more crude than the U.K. oil giant BP PLC, which said Tuesday that it produced an average of 2.1 million barrels of oil equivalent a day in the second quarter. Total’s results also compared favorably with BP, which posted a $6.3 billion loss in the second quarter, mainly because of a settlement for the 2010 Gulf of Mexico spill.
Total remains under pressure from crude prices that have fallen by more than half in the past year, down to the low $50s for a barrel of Brent crude, the global benchmark, from highs of $114 a barrel in 2014.
Total and others have responded with a regime of severe cost cuts and delays to big projects.
Known for his cost-cutting record when he was running the refining and petrochemical unit, Total’s Chief Executive Patrick Pouyanné focused on slashing spending when he took over in November after his predecessor died in a plane crash.
“It is a bottom-up exercise, every manager at every level has been incentivized,” Chief Financial Officer Patrick de la Chevardière said in a conference call.
There are no small savings for Total, Mr. de la Chevardière said. The company squeezed providers from Brunei to Congo, optimized logistics and supply chains and cut unneeded spending wherever possible. In Angola, for instance, the company has ordered its boats servicing offshore oil rigs to go slower and save fuel, the CFO said.
Total has said it is on track to cut its costs by $1.2 billion this year. The firm added it expects three projects to start production later this year.
Total was also helped by its refining business, one of the largest in Europe. Refineries had been a problem child for Europe’s major oil companies, but with crude prices so low, the plants now get cheap feedstock and higher profit.
Operating profit for refining and petrochemicals jumped fourfold in the second quarter compared with the same period a year ago.
“We are very happy to have the resilience that comes with being an integrated company,” Mr. de la Chevardière told investors in a conference call.
