FINANCIAL TIMES: Total chief rules out a 'transforming merger': Total was rumoured last year to be considering a takeover bid for Shell, its bigger Anglo-Dutch rival, which was hit by an accounting scandal. (ShellNews.net) 18 Feb 05
By Martin Arnold in Paris
Published: February 18 2005
Thierry Desmarest, chief executive of Total, yesterday ruled out a big "transforming merger" by the French oil group and promised to look for more niche acquisitions, particularly in the gas sector.
Total was rumoured last year to be considering a takeover bid for Shell, its bigger Anglo-Dutch rival, which was hit by an accounting scandal.
However, Mr Desmarest told the FT: "While the current environment is very favourable, we must guard against risky investments. I do not see any interest in a big transforming merger."
His comments came as Total reported a 23 per cent jump in adjusted net profits to a record 9.04bn ($11.8bn) for 2004. The group generated 14.4bn of cashflow from operating activities, which has encouraged speculation about acquisitions.
Oil and gas production profits rose 22 per cent to 12.8bn, while refining and marketing profits jumped 63 per cent to 3.2bn. Its chemicals arm, part of which is to be spun off next year, continued its recovery, almost doubling profits to 1.1bn.
Mr Desmarest said the high price of oil and the urgent need of several big oil companies to increase reserves through acquisitions meant the price of potential oil sector targets were prohibitively high.
The French group would continue to examine investments on a project-by-project basis, he said. It would focus on niche deals, such as last year's agreement to buy 25 per cent of Novotek, Russia's largest independent gas producer, for about $900m.
The Novotek deal has hit delays in winning approval from the Russian competition commission. But Mr Desmarest said the regulator was waiting for Novotek to finish a reorganisation, to obtain control of certain gas fields, before its decision next month.
The Total chief said the Novotek deal and the expected rapid growth of its liquefied natural gas projects, such as those in Yemen and Iran, would increase the proportion of Total's gas activities, compared with oil.
He said oil currently accounted for about 65 per cent of Total's activity, but this was expected to fall to about 60 per cent by 2010.
The LNG market is expected to grow 8 per cent annually over the next eight years, but Mr Desmarest said Total was aiming for 10 per cent growth in its LNG revenues. He also said competition to buy oil assets was too great.