Total Takes $6.5B Impairment, Cuts Costs To Counter Weak Oil
PARIS, Feb 12 (Reuters) – French energy company Total will cut investment and jobs this year and accelerate its asset sales programme after taking a $6.5 billion writedown in the fourth quarter because of weak oil prices.
Like many of its oil producing rivals, the Paris-based firm was forced to write down the value of North American oil sands and shale assets as well as European refineries as a halving in crude prices since June and sluggish demand took their toll.
Total said it would increase cuts to operational costs to $1.2 billion this year, above a previous target of $800 million. It will reduce organic investments by up to 13 percent to $23-24 billion and spending 30 percent less on exploration work.
Chief Financial Officer Patrick de La Chevardiere said the oil major's objective was to cut its breakeven point by $40 per barrel to about $70. Brent oil futures traded at $56 a barrel on Thursday.
Oil companies across the globe, including Shell and BP, have announced billions of dollars of capital cost cuts to strengthen their books whilst facing lower profits.
The budget cuts also signalled a more long-term change in its exploration strategy for Total, whose long-serving Chief Executive Christophe de Margerie died in a plane crash in Moscow last October.
New Chief Executive Patrick Pouyanne said the cut to the exploration budget, to $1.9 billion in 2015, was in part due to the current low-price but driven more by a desire to revamp the process after having failed to return any major oil find in recent years.
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