Total plans deeper cuts in global project spending
In a scheduled “strategy and outlook” presentation to investors in Paris, Total executives said the company plans to cut both capital and operating expenditures substantially through 2017, including reducing headcount and freezing recruitment.
Total was the first of the large international oil companies to begin cost-cutting several years ago, before oil prices began their latest slide.
Capital spending had already been cut from a peak two years ago of US$28 billion to about $23.5bn this year and the company said it would be cut a further 15 per cent next year and 12 per cent the year after “to a sustainable $17bn-19bn from 2017 onwards”.
The Total chief executive Patrick Pouyanné and other top executives laid out a strategy that forecasts production to grow at an average of 5 per cent a year from 2014 through 2019. That is a slowing rate of growth from the 11 per cent the company registered in the first half of this year and the 7 per cent it expects through 2017.
It effectively cut its forecast rate of production to 2.6 million barrels per day in 2017 from 2.8 million bpd.
In January, Total was the first company to be granted a new concession in Abu Dhabi’s major onshore oilfields concession, known as Adco.
The French company had been one of the legacy Adco concession operators and won a renewal for 40 years with a bid that analysts estimate was $2.2bn for a 10 per cent stake, giving it claim over about 2.2 billion barrels over the life of the contract.
Regaining Adco this year has been a big factor behind the 11 per cent production increase posted in the first half. The 15 fields are on track to boost production from about 1.6 million bpd last year to 1.8 million bpd by the end of 2017.
But neither the UAE nor the Middle East region in general featured in the plans laid out by Total for the next few years.
Total has already said it plans to cut 2,000 headcount this year as part of efforts to trim $1.2bn from operating costs.
The company said it is now aiming for even sharper cuts, with a target of between $2bn and $3bn of additional opex reductions by 2017.
In the part of the strategy presented by Arnaud Breuillac, Total’s head of exploration and production, he said the company would be looking to cut the numbers and rates of contractors as well as freezing recruitment worldwide as part of efforts to reduce global headcount.
The main focus of cuts would be older provinces, he said, highlighting the UK North Sea, which is targeted for a 20 per cent further reduction in personnel by 2017.
“We are preparing the group to face low oil prices for a long time,” Patrick de la Chevardiere, Total’s head of finance, told a press conference after the presentation.
The focus of future growth will be projects such as offshore Angola as well as liquefied natural gas in Papua New Guinea.
As with other large international oil companies, Total executives said they are concerned to maintain their dividend payments for investors even with much lower oil prices.
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Updated: September 23, 2015 04:00 AM