Total plans drastic cuts in investment after 2014 results

PARIS: French oil giant Total has announced a drastic cut in costs and investments after its net profit plunged in 2014 due to crude prices falling by more than 50 percent since June.
Total reported a 62 percent fall in net profit to $4.24 billion last year compared with a year earlier, while revenue dropped 6.0 percent to $236.12 billion, the group said in a statement.
The market-watched net adjusted profit, which excludes volatile elements, fell 10 percent to $12.84 billion, after “oil prices fell dramatically in the second half of 2014, ending the year at $55 per barrel,” the statement said.
The group had a $7.1 billion writedown in its oil sands in Canada and shale oil operations in the US, which will now undergo a restructuring.
With weaker oil demand and prices, Total plans to cut its investments by more than 10 percent, including in its North Sea and West Africa operations, and to reduce its workforce by some 2,000 people mainly through a hiring freeze.
The group still plans to increase production this year to just over 2.3 million barrels per day compared with 2.15 million bpd in 2014.
Total wrote down the value of oil and gas fields in Canada and the US and said it would slash investment after the collapse in market prices led to a net loss of $5.66 billion for the fourth quarter.
Total said its earnings were weighed down by $6.5 billion in charges, mainly against the value of oil sands in Canada and unconventional gas fields in the United States.
Overall, its oil and gas production slid 2 percent to 2.23 million barrels a day in the fourth quarter.
After falling nearly 60 percent from a peak last June, the price of oil bounced back more than 20 percent in recent weeks.
On Wednesday, the price of oil fell $1.18 to $48.84 a barrel in New York.
Total followed European peers BP and Royal Dutch Shell in announcing sharp spending cuts in response to falling oil prices.
Total will lower investments more than 10 percent to between $23 billion and $24 billion this year, and will also cut its exploration budget by about 30 percent to $1.9 billion.
It also raised its forecast for operating cost cuts to $1.2 billion, well above the $800 million planned previously.
Last year, Total and its partners shelved indefinitely the $11 billion Joslyn north oil sands mine in Alberta, Canada, saying its costs didn’t support the investment.
The company also took a $2.1 billion charge to write down the value of its shale gas development in Ohio.
The International Energy Agency recently forecast a “relatively swift” recovery in oil prices but said it doesn’t expect the price of a barrel to come close to returning to the highs of over $100 seen in recent years.
Total CEO Patrick Pouyanne, who took over last October after the death in an aviation accident of former CEO Christophe de Margerie, said in a statement that Total is focused on generating cash flow and reducing its break-even point.