European oil companies Total SA and Eni SpA on Friday posted declines in second-quarter profit as output fell, but said they expect to boost their production during the second half of the year.
The companies share some production challenges. Lower demand for oil and natural gas has taken its toll, encouraging them to produce less gas and prompting the Organization of Petroleum Exporting Countries to cut output quotas several times late last year to defend prices.
Security issues in Nigeria also cut output for both Total and Eni. Eni was able to offer investors reassurance on production, saying average daily hydrocarbon production is likely to increase by between 0.5% and 1% on the year. Oil and gas output fell 2.2% from a year earlier in the second quarter. The Italian company said it plans to boost output in places such as Congo and the U.S. to offset the factors hindering its output.
Total, meanwhile, said that ramping up new fields in offshore Nigeria, the Gulf of Mexico and Norway, and starting up liquefied-natural-gas projects in Yemen, Qatar and the Angolan Tombua Landana oil field will help it improve volumes over the remaining months of the year.
The French oil company's production performance cast a cloud over the stock, with analysts expressing concern that the company is now likely to post lower output in 2009 for the second year in a row. Total posted a 7.3% drop in volumes in the second quarter compared with a year earlier.
Even though demand and prices have weakened amid the economic slump, large oil companies are confident that supply will become tighter as the downturn eases.
Other big energy companies also are having trouble sustaining oil and gas production rates, as both Exxon Mobil Corp. and Royal Dutch Shell PLC showed Thursday in their earnings reports. A drop in European demand for gas led Exxon to pare output by 12% in the region.
While Eni was able to say it will raise output volumes over the full year, its strategy of buying smaller energy companies to boost growth has contributed to widening its net debt to 18.4 billion euros ($26.2 billion) at the end of June from 16.5 billion euros at the end of March.
Total's second-quarter net profit slid 54% to 2.17 billion euros while Eni's fell 76% to 832 million euros, with prices and demand for crude and petroleum products far lower than a year earlier.