Total to cut costs after 10% fall in output and loss of Abu Dhabi onshore concession
Total is planning to trim costs as second-quarter profits dipped 12 per cent, weighed down by the loss of its Abu Dhabi onshore concession and record low production elsewhere.
Net income for the French oil major sank to US$3.2 billion in the second quarter, down from $3.58bn in the same period last year, it reported yesterday. The results excluded differences in inventories.
Production tumbled by 10 per cent to 2 million barrels of oil equivalent a day.
“The cost-cutting programme is being finalised and we will give the first numbers in September” for 2015 to 2017, the chief financial officer Patrick de la Chevardiere, was quoted as saying by Bloomberg News. The programme would include all divisions including headquarters, the news wire reported.
Total is also planning to cut spending and sell assets.
“Growing geopolitical tensions marked the second quarter environment and, despite the stability of the Brent price, drew attention to the sensitive balance of the oil markets,” said the chairman and chief executive Christophe de Margerie in the financial results report.
More than half of the 10 per cent loss in output during the period — about 6.5 per cent — was due to the expiration of Total’s licence in the UAE. Another 0.5 per cent was because of deteriorating security conditions in Libya, with 3 per cent due to normal production declines and maintenance.
Total, ExxonMobil, Royal Dutch Shell and BP lost their 75-year rights to Abu Dhabi’s oldest producing fields in January when the contract expired. The concession’s expiry contributed in part to BP reporting a 6 per cent drop in production in the second quarter, the company said on Tuesday.
Along with several other companies, Total has bid for the renewal of the Abu Dhabi Company for Onshore Oil Operations (Adco) concession, which accounts for about half of the emirate’s almost 3 million-barrel-per-day output and includes fields that hold more than 100 billion barrels of oil in one of the most politically stable parts of the world open to foreign partners.
Total was also hit by slimmer margins in crude processing, mainly as a result of a glut of capacity in the European market. Total said earlier this month that European refinery margins slipped to $10.90 per tonne of crude processed, down from $24.10 in the year earlier period, Bloomberg reported, citing information from Total earlier this month.
Total reportedly said that it had stopped increasing its stake in Novatek, Russia’s second largest gas producer, after the crash of the Malaysia Airlines flight MH17 earlier this month, the Wall Street Journal reported, citing Mr de la Chevardiere. Russia is suspected by Europe and the United States of playing a part in the downing of the aircraft, as well as aggravating tensions within neighbouring Ukraine. The EU this week agreed to impose sanctions targeting Russia’s oil sector and banks.
As for all majors, Russia is an important market for Total, with the company forecasting the largest chunk of its hydrocarbon production to originate from the country by 2020. Total owns 18 per cent of Novatek and had planned to raise its stake to 19.4 per cent.
* with agencies
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Updated: July 30, 2014 04:00 AM