Total
cuts capital spending and output target, reassures on
dividend
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[September 23, 2015]
By Karolin Schaps
LONDON (Reuters) - French oil major Total
has cut its capital and operating expenses again in response to low oil
prices and trimmed its ambitious output growth targets but reassured the
market that its dividend was safe.
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The cost cutting deepens previous steps taken by Total to withstand
the oil price rout and is similar to measures taken by rival majors.
So far only Italian firm Eni has cut its dividend among oil majors,
most of whom see the payout to shareholders as the chief factor
supporting share prices.
"We cannot control the price of oil and gas but we can control our
costs and allocation of capital," Chief Executive Officer Patrick
Pouyanne told investors in London on Wednesday.
Benchmark Brent oil futures were flat at $49 per barrel on
Wednesday. Total's stock was broadly unchanged.
Total said in a presentation to investors and media in London that
it would reduce capex to $20-21 billion from 2016 and to $17-19
billion per year from 2017 onwards compared with $23-24 billion in
2015 and a peak of $28 billion in 2013.
It also said it will maintain its asset disposal target of $10
billion for 2015-2017.
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"We wanted to dramatically reduce capex again next year so that we
can reach the very important target of covering the dividend at $60
per barrel in 2017. This is the cornerstone of everything we are
doing," Chief Financial Officer Patrick de la Chevardiere told
reporters.
"The break-even price is decreasing sharply. The objective is to by
2017 decrease the break-even price. To cover the existing dividend
you need something like a $45/bl assumption by 2019," de la
Chevardiere said.
Total also raised the target of operating expenses reductions to $3
billion by 2017, from a previous target of $2 billion.
It said its production would grow by 6-7 percent per year between
2014-2017 and by an average of 5 percent a year between 2014-2019,
effectively reducing its 2017 production target to 2.6 million
barrels per day from the previous 2.8 million bpd.
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"We lose about 200,000 bpd in comparison to the initial target.
About 100,000 bpd come from projects which are facing some delay. An
additional 100,000 bpd is due to the lower capex program," de la
Chevardiere told reporters.
He also said the company has slightly adjusted redistribution of
capital expenses with refining or downstream now getting a slightly
bigger proportion -- 25 percent of total capex versus 20 percent
previously.
Production or upstream will get a slightly smaller proportion, 75
percent of capex versus 80 percent previously.
Oil majors' refining business has outperformed in the past few
quarters as low oil prices increased profitability. By contrast,
upstream has underperformed.
(Editing by Louise Heavens and David Evans)
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