Total Sets out Corporate Strategy
French oil major Total has produced its corporate strategy for the next few years, satisfied that the last one exceeded expectations. Among the achievements of the last three years was a post-dividend breakeven lowered to $50/barrel, more than half what it was in 2014.
It is now looking forward to production growth of 6-7%/year, capital investment of $15-17bn/yr and a planned yearly $5/barrel cut in operating expenses from 2017 to 2020 compared with 2014 base, up from $3.70/barrel in 2017.
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It took advantage of weaker prices to buy more than 7bn barrels of oil equivalent (boe) of resources costing less than $2.5/boe, representing a quarter of the upstream portfolio, and "significantly high-grading the asset base." The portfolio has a rich pipeline of major projects to be sanctioned by 2020 that will add more than 700,000 boe/d of production, thus contributing to a 5% average growth from 2017 to 2022, it said. On top of that is "a number of short-cycle projects such as deepwater tie-backs and infill drilling which can be developed at a cost of less than $7/boe and offer high returns and quick payback, it said.
Total also aims to "develop a profitable low carbon electricity business" and to update its reporting structure from 2019 to include a new segment called Integrated Gas, Renewables and Power (iGRP). This segment - like rival Shell's - will consolidate the current gas, renewable and power perimeter, as well as upstream and midstream LNG assets currently reported in exploration & production.
At $60/b Brent, cash flow is expected to increase by $7/b from 2017 to 2020 and return on equity to increase to 12%. Dividends have risen by 3.2% for 2018, in line with an increase of 10% by 2020 and Total is buying back $1.5bn of shares as part of the $5bn buyback programme from 2018-20.
Total was the last major oil company to sanction an expensive Angolan deepwater field development (Kaombo) when breakeven costs were high and as the oil price crashed in 2014, but more recently has been the first to sanction a new large development offshore Angola four years later (Zinia-2) at a time of much lower breakeven costs.