Total, which has struggled with production outages in Libya, Kazakhstan and Nigeria, has cut its 2017 output goal to 2.8mn barrels of oil equivalent per day from a previous 3mn
Reuters
French oil company Total is to sell more assets and cut costs to generate more cash and is to revamp exploration plans after reducing its oil production target.
Total, which has struggled with production outages in Libya, Kazakhstan and Nigeria, yesterday cut its 2017 output goal to 2.8mn barrels of oil equivalent per day from a previous 3mn.
France’s biggest company by market value and the West’s fourth biggest oil and gas group launched a “high-risk, high-reward” drilling strategy two years ago. But this has had disappointing results as high-cost investments did not lead to large discoveries.
“We have more than 15 major projects to fuel the future growth ... Two thirds of those projects are operated by us so that gives us confidence we will achieve the targets,” chief financial officer Patrick de La Chevardiere said at Total’s investor day in London yesterday.
Total, like other big oil companies, has been under pressure from shareholders to cut costs and raise dividends as rising costs in the oil industry and weaker oil prices squeeze profitability.
It has been selling off businesses, such as its adhesives division Bostik, which French chemicals group Arkema has offered to buy for €1.74bn ($2.24bn).
The company now plans to sell $10bn worth of assets in 2015-17, having achieved a target of $15bn-$20bn of sales in 2012-2014.
Since 2010, Total has generated a total of $30bn from assets sales, according to De La Chevardiere. That makes it one of the most ambitious sell-off programmes in the industry alongside BP’s $50bn sell-off plan.
De La Chevardiere declined to comment on what assets the company could sell, adding that under the previous asset sale plan it had sold both upstream and downstream businesses.
The company’s investments would fall to $25bn in 2017 from a peak of $28bn in 2013 while operating expenses would fall by $2bn per year by 2017.
Total CEO Christophe De Margerie last year said the company aimed for a “soft-landing” in capital investments.
Yesterday, the group stuck by an earlier target to generate cash of $15bn in 2017 but cut the target for next year to $7bn from a previous $10bn. It had free cash flows of $2.6bn in 2013.
The company also said it had hired Kevin McLachlan as senior vice president for exploration. He was formerly with US energy company Murphy Oil, where he held the same position.
Asked about Total’s exploration track record, de La Chevardiere said: “When you follow the fact that we hire somebody from outside, you have the answer. The new head of exploration is coming from another company. The issue we had was to make discoveries.”
Total is part of a consortium developing the giant Kashagan oil project in Kazakhstan, which has been held up by gas leaks in the field’s pipeline network. The country has said it expects the field, one of the world’s biggest oil finds of recent times, to come onstream in 2016.
“We are discussing repairing the pipelines. It will be done by 2016 ... It is a last chance for us,” de La Chevardiere said.
Total also did not forecast any output contributions in 2015 from its Angola liquefied natural gas project, where a string of missteps has led to multiple delays. The Chevron-led venture expects the shutdown to last until mid 2015.
In Russia, Total believes its Yamal liquefied natural gas joint venture in the Arctic can go ahead on time despite international sanctions against Russia over its role in the Ukraine crisis.
“The Yamal production is not included in our 2017 production goals. Even though we could start before that,” De La Chevardiere said.
He also said he expected Europe’s refining capacity to continue to shrink because of falling demand and poor refining margins. “We will adapt our production to the market,” he said adding that the firm could cut capacity or sell refineries.
CEO De Margerie told a conference call with investors yesterday that he was optimistic despite production target cuts.
“Total is still well positioned as one of the fastest growing global major companies between now and 2017,” he said.
