Total Follows Other Majors in Slashing Capex

France's Total said on March 23 it would shave more than $3bn off its planned investments in 2020, lowering the total to under $15bn, in order to weather the oil market downturn.

The savings mainly amount to short-term flexible capex, Total said. The company aims to bring down its operating costs by $800mn yr/yr in 2020, instead of the previous target of $300mn.

Total had announced a plan to buy back $2bn of shares in 2020, assuming a $60 oil price environment. It bought back $550mn of stock in January and February alone. With Brent now trading at around $25/b, it has suspended the buyback programme, just as fellow European majors Shell and Equinor have done.

In a presentation, Total said it was more prepared for the current crisis than prior to the 2015-2016 downturn. Its cash breakeven point was less than $25/b in 2019, versus more than $100/b in 2014. Its upstream operating expenditure averaged $5.4/boe last year, compared with $9.9/boe five years earlier, while its organic capex came to $13.4bn, down from $26.4bn in 2014.

 Total fared better than some of its competitors in the fourth quarter, posting adjusted net income of $3.17bn, unchanged from the same period in 2018. It was supported by higher output and increased LNG sales, which countered the impact of weaker prices. However the LNG price will be drifting downwards through the oil indexation clauses in its term contracts, and demand for oil products is sharply down as aviation and other transport fuel needs fall.