• Monday, February 26, 2024
businessday logo


Total to cut costs, sell assets after lowering output target


Total SA plans to cut costs and sell more assets after Europe’s second-biggest oil company lowered its forecasts for growth in production.

Output may be 2.3 million barrels of oil equivalent a day in 2015, short of the prior 2.6 million-barrel target, and 2.8 million in 2017, down from 3 million, it said in a statement.

“We are more confident,” in reaching these production goals because most new projects are operated by the company, chief financial officer Patrick de La Chevardiere told reporters in London at the company’s annual investor day.

The Paris-based producer retained its 2017 cash-flow goal, pledging to keep selling assets and cutting operating costs to save $2 billion a year. It will overhaul exploration strategy.

CEO Christophe de Margerie has battled to raise output as fast as planned after leaks shut the Caspian Sea Kashagan project and an Abu Dhabi concession ended. He has pledged to cut investment and curb costs after spending billions on new projects and drilling “high risk” exploration wells.

Investment will be cut to $25 billion in 2017, from $26 billion this year and a peak of $28 billion in 2013, Total said.

Completion of some of Total’s projects has slipped, with output at Laggan-Tormore off the Shetland Islands expected in the first quarter rather than later this year after completion of onshore plant was hit by labour strife and winter weather. It is also no longer counting on output from Yamal LNG in 2017.

Total expects no output from Kashagan, Angola LNG and Adco in Abu Dhabi in 2015, de La Chevardiere said. Kashagan will begin producing again in 2016 after pipelines are replaced.

Second-quarter output fell on a loss of concessions in Abu Dhabi, Libyan disruptions and halts at Kashagan and Angola LNG.

The French company maintained a target of generating $15 billion of free cash flow in 2017, even as next year’s figure was cut to $7 billion from $10 billion, the CFO said.

Total plans to sell another $10 billion of assets by 2017, adding to the $15 billion to $20 billion targeted from 2012 to 2014. It has achieved $16 billion so far under that plan, with $4 billion under way, including sales of a stake in Nigeria’s Usan field and the Bostik chemicals business, the CFO said.

BNP Paribas has been hired to complete the sale of Usan, probably by the start of next year, de La Chevardiere said.

The dividend is safe and has room to grow, de Margerie told investors. Payouts are preferred over buybacks, he said.