February 12, 2009 / 12:03 PM / 9 years ago

UPDATE 3-Total defends UTS bid as Q4 profits fall

* CEO says UTS shareholders “unrealistic”

* Q4 net profit falls 8 pct to 2.87 bln euros

* To hold investment steady in 2009

(Recasts, adds detail)

By Marie Maitre and Muriel Boselli

PARIS, Feb 12 (Reuters) - French oil major Total TOTF.PA defended its $500 million bid for Canadian oil sands player UTS Energy Corp UTS.TO on Thursday as it announced a drop in fourth-quarter profit due to lower oil prices.

Total CEO Christophe de Margerie said UTS shareholder demands for more were unrealistic and, though he did not expect investors to immediately accept Total’s C$1.30 a share bi,d he dismissed calls for an offer above C$2.50.

UTS closed on Wednesday at C$1.78.

“If one looks at the current share price, it is very far away from the numbers cited by the main shareholders,” de Margerie told reporters at a news conference.

UTS on Monday urged shareholders to reject the Total bid and formally sought rival offers. [ID:nN09510405]

On Jan. 29, UTS’s largest shareholder West Face Capital Inc said UTS was worth over C$2.60/share while the second-largest, I.G. Investment Management, said the stock was worth over C$2.50/share.

The high cost of squeezing crude from Alberta’s bitumen- drenched soil means new investments in the oil sands industry would not currently be profitable but Total hopes a recovery in crude prices and lower costs will make investments pay off.

France’s biggest company by market value reported an 8 percent drop in net profit excluding one-off items and unrealised gains or losses related to changes in the value of inventories to 2.873 billion euros ($3.71 billion) in the fourth quarter. The result was ahead of forecasts.

Total shares rose 1.5 percent to 40.67 at 1127 GMT, outperforming a 1.1 percent fall in the DJ Stoxx European oil and gas sector index .SXEP.

In dollar terms, Total’s fourth-quarter underlying result fell 16 percent year-on-year, compared with a drop of 32 percent at Royal Dutch Shell RDSa.L and 35 percent at Britain’s BP BP.L, when calculated on a similar basis.

Full year adjusted net profit rose 14 percent to a new record of 13.92 billion euros.

BETTING ON FUTURE DEMAND

Total, Europe’s third-largest oil company, said it would hold investment broadly steady, despite the collapse of crude prices, in the belief tight supplies in the longer term will push prices back up.

This echoes a trend among the very largest oil companies, while small and medium size companies slash capital expenditure.

“We are committed to maintain our investments... It would be not only a mistake but also a serious error not to,” de Margerie said, adding that “things could change” if oil prices remained sustainably under $40 a barrel.

Yves Louis Darricarrere, head of exploration and production, said projects could be delayed to enable the company to take advantage of an expected fall in costs.

Analysts said Total’s plans should underpin good growth in production.

“Total seems to be pointing to growth of circa 3-4 percent this year .. The company’s clarity on long-term prospects and the depth of its growth portfolio remain impressive in our view,” said Gordon Gray, oil analyst at Collins Stewart.

In 2008, Total reported success on exploration projects, with an organic replacement growth of 112 percent. In recent years large oil companies’ reserves fell as new finds failed to match production.

Total’s downstream segment, which includes the refinery business, posted a 41 percent rise in profits.

In mature areas such as Europe, the group said it needed to reduce oversupply of gasoline due to a weaker export outlook to the United States.

The adjusted net profit of 2.9 billion euros compares with an average forecast of 2.6 billion euros in a Reuters poll of 11 analysts.

Total shares lost 31.5 percent in 2008, while the rest of the energy sector .SXEP plunged 40 percent. (Additional reporting by Tom Bergin in London; Editing by David Cowell)

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