French oil and gas major Total cuts investment plans
24 Sep 2015
French oil and gas major Total on Wednesday unveiled reduced investment plans and hiked costs as it gears up for an extended period of depressed oil prices.
The cost cutting added to the earlier steps the company took to face up to the oil price rout and was much like the measures taken by rivals.
Among oil majors, only Italy's Eni had cut its dividend among oil majors, most of whom see the payout to shareholders as the chief factor supporting their shares.
"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.
According to Total, it would cut capital expenditure to between $20 billion and $21 billion from 2016 and to $17-19 billion per year from 2017 onwards, which compared with the $23-24 billion in 2015 and a peak of $28 billion in 2013.
Total further maintained its target of $10 billion assets sale in the coming two years.
Total's shares, which were down to a two-year low of €36.92 in August, rose 2.2 per cent at €40.64 in the afternoon.
According to commentators, the cost cutting could send shock waves through the North Sea oil and gas industry where Total was a major operator.
Although the UK Continental Shelf was said to be unaffected by the cuts, concern was mounting that thousands more jobs offshore could be lost is the oil price continued to fall.
Total is the operator of the new $3.5 billion Laggan Tormore gas project west of Shetland, which was due to go on stream later this year.
According to the company, that would delay three projects in Norway, Australia and Italy.
According to commentators, with oil prices trading well below $50 per barrel, operators such as Total have been forced to rework their business models in order to safeguard dividends.
In a note to investors, Barclays said, ''Total is adapting quickly to the prevailing environment reflecting not only the contribution from a strong Eurocentric downstream business but also an upstream business that is delivering both hydrocarbon growth and lower costs.''
