Total SA, Europe’s second-biggest oil company, 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 a day, compared with a previous forecast of 2.8 million barrels a day, the company said Wednesday before holding an investor day in London.
The measures are a sign that oil majors 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 2015.
“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 $60 a barrel. Martijn Rats, an analyst at Morgan Stanley in London, 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 will reduce investment in 2016 to between $20 billion and $21 billion from as much as $24 billion this year and a peak of $28 billion in 2013. Total said it will spend $17 billion to $19 billion in 2017, down from a previous target of $20 billion.
In addition, the company announced projects delays in Australia, Norway and Italy and said that it will increase cost savings from operations by 50 percent by 2017 to $3 billion, up from a previous target of $2 billion.
Recommended for you
