MOSCOW (MRC) -- Total SA has scaled back the expansion strategy it pursued during the past decade of high oil prices, announcing a fresh round of investment cutbacks and project delays while reducing production targets, reported Hydrocarbonprocessing.
The measures, laid out by the French energy company on Wednesday before an investor day in London, signal that the belt-tightening among global oil producers to protect dividends will extend into 2017 and hurt future growth.
"We are preparing the group to face low oil prices for a long time," Total chief financial officer Patrick de la Chevardiere told reporters. "We don’t want to be the first group to cut the dividend."
The oil company, Europe’s largest after Royal Dutch Shell, expects to produce 2.6 million bpd of oil equivalent in 2017 compared with a previous forecast of 2.8 million bpd. Growth will slow to 1% to 2% a year starting in 2019 from the current 6% to 7%.
The company said the measures will allow it to fund shareholder payouts in 2017 from the cash it generates pumping, refining and selling oil, without the need to take on debt, even with crude at USD60/bbl.
To protect the dividend, Total will reduce investment in 2016 to between USD20 billion and USD21 billion from as much as USD24 billion this year and a peak of USD28 billion in 2013. The company plans to spend USD17 billion to USD19 billion in 2017, down from a previous target of USD20 billion.
Major oil companies including ExxonMobil and Shell have told investors they'll do whatever it takes to maintain dividends without compromising future growth. Total’s announcement signals that growth plans can't in fact be shielded from spending cuts.
We remind that, as MRC reported earlier, in December 2014, Total permanently shut its high density polyethylene (HDPE) line in Belgium. The plant was shut permanently owing to weak margins which have arisen on account of cheap imports in the region. Located at Antwerp in Belgium, the line has a production capacity of 70,000 mt/year.
Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
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