Total Says to Cut Costs By A Further $1B
PARIS, Sept 22 (Reuters) - French oil and gas giant Total raised its savings target and lowered its investment forecast on Thursday in further moves to weather prolonged oil price weakness.
The company is targeting cost savings of around $3 to $4 billion by 2018, Chief Executive Officer Patrick Pouyanne told investors in London. In February, the firm said it was aiming for $3 billion by 2017.
"We are very confident that we will reach this $4 billion. Most of it will come from upstream," Pouyanne said.
A reorganisation that has seen the creation of a unit to pool resources will enable the company to achieve the target, Pouyanne said. "The idea is to leverage on economies of scale across the group."
He said the company makes purchases of about $30 billion per year. Out of that, Pouyanne said it has identified about $15 billion which could be jointly procured by at least two businesses within the group.
Total also said it plans to reduce investment to between $15 billion and $17 billion per year from 2017 to 2020, $2 billion less than announced previously.
"This is a strong commitment on our part. We do not intend to go beyond this range even if there was a sudden upsurge in oil prices," he said.
Total said that level of investment will enable it to grow its output by an average rate of 5 percent per year from 2014 through to 2020, extending by a year its previous guidance.
The company said it was committed to lowering its breakeven price. "In 2017, cash flow from operations will cover Capex, including resource renewal, and dividend cash-out with Brent at $55 per barrel," Total said in its presentation to investors. (http://bit.ly/2cqXX7j)
Pouyanne said in July that oil prices remained volatile, but the company had gained from a recovery in Brent crude from the start of the year when it went below $28 per barrel to average $46 per barrel in the second quarter.
Brent was up 61 cents or 1.3 percent at $47.44 per barrel by 1759 GMT on Thursday.
Total said the discounted scrip dividend it has been offering, will end in 2017 if Brent is at $60 per barrel.
On divestment, Pouyanne said the firm has reached its objectives and does not see the need to do more. He confirmed that Total was looking at selling its Italian petrol station joint venture with Erg, while talks over the sale of its speciality chemicals and equipment division Atotech, were ongoing.
Sources close to the matter told Reuters on Thursday that CVC, Carlyle and a consortium comprising Cinven and BC Partners will hand in final bids in coming days.
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