By Michel Rose
PARIS | Fri Jul 26, 2013 5:34am EDT
(Reuters) - French oil group Total (TOTF.PA) reported a drop in second-quarter profits on Friday, hit by a fall in oil prices that offset its first rise in output in three years.
Europe's third-largest oil company after Royal Dutch Shell (RDSa.L) and BP (BP.L) said its second-quarter adjusted net profit fell 3 percent to 2.7 billion euros ($3.57 billion), on the back of a 4 percent decline in revenue to 47 billion euros.
Brent crude oil prices hit a nine-month low below $100 a barrel at the beginning of the second quarter but are now back up to $107.30.
Production rose 1 percent from the same quarter a year ago, the first year-on-year rise since 2010 thanks to the re-start of the Elgin gas field in the North Sea last March after a year-long shutdown, improved security conditions at Total's Yemen liquefied natural gas complex and the first cargo shipped from its Angola LNG project.
The rise to 2.29 million barrels of oil equivalent a day was welcomed by analysts, as investors have doubted Total could reach its oil and gas output growth target of 2-3 percent this year and its longer-term goal for 3 million barrels of output capacity in 2017.
"Finally a quarter of production growth from Total driving a better than expected number.. it's important to get visible evidence of this growth because the market just hasn't believed it," said Oswald Clint of Bernstein in London.
Total regularly missed its oil and gas production targets in the past, and shares are currently trading at 40 euros, valuing the stock at 7.9 times 12-month forward earnings, still a 16 percent discount on average to its global peers.
Shares in Total edged down 0.1 percent by 0924 GMT (5.24 a.m. ET), as the broader European oil and gas sector gained 0.2 percent .SXEP.
"Very good robust results from Total," said Jason Kenney of Santander. "Hopefully the company's back on fo