Total beats profit forecast, cost cuts to exceed targets

* Net adjusted profit $3.1 bln vs $2.6 bln consensus

* Total (Swiss: FP.SW - news) 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 on Wednesday, helped by increased refining margins in Europe and accelerated cost cuts to adjust to a low oil price environment.

Europe's second biggest oil company reported adjusted net profit of $3.085 billion, beating analyst expectations of $2.61 billion and only a two percent decline from a year ago, since when crude oil prices have collapsed by 44 percent.

While Total shares have fallen 20 percent since crude hit its 2014 peak in June, they have performed better than the company's four "Big Oil" rivals: Exxon Mobil Corp, Chevron Corp, Royal Dutch Shell (Xetra: R6C1.DE - news) and BP.

Analysts have praised Total's decision to start cutting costs early to cope with the lower oil price environment and the focus by Europe's biggest refiner on clear goals.

Total shares rose 2 percent in early trading, outperforming a 1.3 percent rise in the oil and gas sector.

"Whatever the oil price, Total aims to generate $8 billion of organic free cash flow by 2017, a welcome, pragmatic approach, in our view," said Raymond James analyst Bertrand Hodee in a note. "The group is focused on what it can control."

Total said it was expecting to exceed its cost reduction target of $1.2 billion this year, a goal it has already raised from $800 million.

It confirmed its aim to cut capital spending to $23-24 billion this year from $26.4 billion in 2014.

Total has sought to use the cash to strengthen its balance sheet and said its gearing was down to 26 percent at the end of June from 31 percent at the end of last year.

Oil companies are cutting spending on exploration and have cancelled projects in high-cost areas such as Canadian oil sands after the oil price collapse, to protect shareholder returns. Total, like its rivals, said it was keeping its dividend unchanged, at 0.61 euros per share.

Profits at Total's downstream refining and chemicals sector tripled, while oil and gas output rose from a year ago thanks to new start-ups and the renewal of an Abu Dhabi concession.

At 2.299 million barrels of oil equivalent, output was slightly lower, however, than the first quarter due to the shutdown of a liquefied natural gas plant in war-torn Yemen.

The jump in refining and chemicals profits to $1.3 billion from 401 million, shows how integrated oil companies can weather lower oil price by offsetting income falls from exploration and production with higher margins on gasoline and diesel sales.

Total also said market conditions remained favourable at the start of the third quarter.

($1 = 0.6409 pounds) (Additional reporting by Raphael Bloch in Paris and Sarah Young in London,; editing by David Clarke)