* Net adjusted profit $3.1 bln vs $2.6 bln consensus
* Total sees cost cuts exceeding 2015 target
* Output to rise by more than 8 pct despite Yemen (Adds shares, analyst, details)
By Michel Rose
PARIS, July 29 (Reuters) - French oil company Total posted higher than expected second-quarter profit onWednesday, helped by increased refining margins in Europe andaccelerated cost cuts to adjust to a low oil price environment.
Europe's second biggest oil company reported adjusted netprofit of $3.085 billion, beating analyst expectations of $2.61billion and only a two percent decline from a year ago, sincewhen crude oil prices have collapsed by 44 percent.
While Total shares have fallen 20 percent since crude hitits 2014 peak in June, they have performed better than thecompany's four "Big Oil" rivals: Exxon Mobil Corp,Chevron Corp, Royal Dutch Shell and BP.
Analysts have praised Total's decision to start cuttingcosts early to cope with the lower oil price environment and thefocus by Europe's biggest refiner on clear goals.
Total shares rose 2 percent in early trading, outperforminga 1.3 percent rise in the oil and gas sector.
"Whatever the oil price, Total aims to generate $8 billionof organic free cash flow by 2017, a welcome, pragmaticapproach, in our view," said Raymond James analyst BertrandHodee in a note. "The group is focused on what it can control."
Total said it was expecting to exceed its cost reductiontarget of $1.2 billion this year, a goal it has already raisedfrom $800 million.
It confirmed its aim to cut capital spending to $23-24billion this year from $26.4 billion in 2014.
Total has sought to use the cash to strengthen its balancesheet and said its gearing was down to 26 percent at the end ofJune from 31 percent at the end of last year.
Oil companies are cutting spending on exploration and havecancelled projects in high-cost areas such as Canadian oil sandsafter the oil price collapse, to protect shareholder returns.Total, like its rivals, said it was keeping its dividendunchanged, at 0.61 euros per share.
Profits at Total's downstream refining and chemicals sectortripled, while oil and gas output rose from a year ago thanks tonew start-ups and the renewal of an Abu Dhabi concession.
At 2.299 million barrels of oil equivalent, output wasslightly lower, however, than the first quarter due to theshutdown of a liquefied natural gas plant in war-torn Yemen.
The jump in refining and chemicals profits to $1.3 billionfrom 401 million, shows how integrated oil companies can weatherlower oil price by offsetting income falls from exploration andproduction with higher margins on gasoline and diesel sales.
Total also said market conditions remained favourable at thestart of the third quarter.
($1 = 0.6409 pounds) (Additional reporting by Raphael Bloch in Paris and Sarah Youngin London,; editing by David Clarke)
BP (BP.)
