Total on Tuesday announced a deepening of capital spending cuts and a
likely 5% reduction in its upstream oil and gas output in 2020 from
previous guidance, while also highlighting a 50% reduction in its
refinery utilization, as it insisted on the underlying strength of the
company.
In a first-quarter results statement, reflecting the global
coronavirus and meltdown in markets, Total said it now expects its 2020
oil and gas output to be in a range of 2.95 million-3.0 million b/d of
oil equivalent, down from 2019's 3.01 million boe/d and a forecast in
February of 2% growth this year.
In Q1, it produced 3.09 million boe/d, up 5% on the year.
The production decrease reflects output curbs by the OPEC+ countries
as well as voluntary output cuts in Canada and ongoing difficulties in
Libya, it said.
It also deepened cuts to its organic capital expenditure this year
to 25%, compared with a 20% cut announced in March, saying net
investments would be under $14 billion.
"The group is facing exceptional circumstances: the COVID-19 health
crisis, which is affecting the world economy and creating major
uncertainties, and the oil market crisis, with the sharp drop in oil
prices since March," CEO Patrick Pouyanne said.
However, Pouyanne went on to tell investors the 2014-15 oil price
collapse had helped prepare the company for the current crisis, with
upstream operating expenditure reduced to $5.40/boe of production last
year. "Fundamentally Total is very well positioned to weather the
storm," he said.
Total reiterated its goal announced in March to break even at an
average oil price of $25/b on an "organic" basis this year, excluding
asset deals.
In the downstream segment, Total said its refinery throughput and
sales had been running at 50% below normal since mid-March, "with
uncertainty about the timing of a return to normal."
In Q1, the company's refinery throughput was down 22% year on year
at 1.44 million b/d, including a 57% drop at its French refineries to
255,000 b/d.
It said it had kept offline two of its French refineries, Feyzin and
Grandpuits, following maintenance, and forecast overall refinery
throughput this year would be around 70%-75% of capacity. However,
Pouyanne, said the company's petrochemical business was holding up well,
reflecting strong demand for plastics during the coronavirus crisis.
Total's financial results reflected a sharp deterioration in both
upstream and downstream profitability, with refining performing not much
better than upstream operations. But the company's push into LNG
appeared to pay off, with operating profit in the Integrated Gas,
Renewables & Power segment rising 54% on the year to $913 million.
Total maintained a stronger balance sheet than its peers, with
gearing at 25% at the end of the year, avoiding the need for it to
emulate Shell's landmark dividend cut last week. The company's adjusted
profit was down 35% from a year earlier at $1.78 billion.
Pouyanne said there was much that remained uncertain on the demand
side, but Total's "fundamentals" were strong and reduced US shale
production could support a recovery.
"When you don't invest, when investment in Exploration
&Production will again be lower than before, the shale oil... will
be impacted and quite quickly. It could accelerate the miss in terms of
production," he said.
CLIMATE GOALS
Whilst mainly focused on the coronavirus and the turmoil in oil
markets, Total's statement moved the company a step further in its
emissions reduction goals, promising to achieve net-zero emissions from
its own operations and a 60% cut in emissions from the products it sells
by 2050, as well as net-zero emissions from products used in Europe by
the same date.
The company therefore remains more cautious than BP, which has
pledged net-zero emissions from all its operations and products by 2050,
but is close to Shell's latest climate goals, set out on April 16.
Pouyanne denied renewables and electricity sector investments could
not compete against oil and gas in terms of financial returns, although
he acknowledged such a switch would not be quick. "I see these
low-carbon energy, low-carbon electricity assets as bringing the group a
more stable balance of revenue. It will take time," he said.
