Thu, Sep 24, 2015 - Page 15 News List

Total reduces investment and output amid oil slump

Bloomberg

Total SA, the second-biggest oil company in Europe, scaled back its production target for 2017 as it announced a further round of investment cuts and project delays to protect its dividend.

Total expects to produce 2.6 million barrels of oil equivalent per day, compared with a previous forecast of 2.8 million barrels per day, the company said yesterday before holding an investors’ conference in London.

The measures are a sign that major oil players are extending their belt-tightening into next year and 2017 after companies from Chevron Corp to Royal Dutch Shell PLC announced large spending cuts for this year.

“We are preparing the group to face low oil prices for a long time,” Total chief financial officer Patrick de La Chevardiere told reporters in London.

Total said the new measures will allow it to fund dividends by 2017 from the cash it generates pumping, refining and selling oil, without the need to take on debt, even with crude prices at US$60 per barrel.

Morgan Stanley London-based analyst Martijn Rats said in a report before the announcement that “investors had increasingly become wary on whether the company’s dividend was sustainable” following oil’s slump.

The French group is to reduce investment for next year to between US$20 billion and US$21 billion from as much as US$24 billion this year and a peak of US$28 billion in 2013.

Total said it plans to spend US$17 billion to US$19 billion in 2017, down from a previous target of US$20 billion.

In addition, the company announced delayed projects in Australia, Norway and Italy and said that it would increase cost savings from operations by 50 percent by 2017 to US$3 billion, up from a previous target of US$2 billion.

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