Total chops capex long-term
French oil major Total is planning to reduce its capital expenditure on a long-term basis.
According to its Strategy & Outlook presentation, Total is executing its plan to reduce capital expenditures to 23-24 billion dollars in 2015, from the peak of $28 billion in 2013.
The Group will further reduce investment down to 20-21 B$ in 2016, before returning to a sustainable level of 17-19 B$ from 2017 onwards.
Opex reduction target increased by 50%
In 2014, Total was the first major to launch a global cost reduction program. In February 2015, as part of a robust response to lower oil prices, the Group reinforced the program to achieve 1.2 B$ savings in 2015. At the end of the first half 2015, 66% of the annual target has already been reached.
Leveraging the momentum from these results and taking into account future cost deflation, the Group is further increasing its Opex reduction target by 50% from 2 B$ to 3 B$ by 2017.
Total achieved a production increase of 11% year on year during the first half of 2015. Production is planned to grow by an average of 6-7% per year between 2014 and 2017 and by an average of 5% per year between 2014 and 2019. Main drivers for production growth include twenty major start-ups, eight of which are in 2015, and increasing production efficiency.
Total says that capital discipline, further opex reduction and growing production will deliver improving cash flows. The Group confirms that organic free cash flow will cover the dividend by 2017 at 60 $/b.
The Group plans to allocate its capital employed 75% to Upstream and 25% to Downstream. The Group also plans to invest Capex of around 500 M$ per year to build profitable businesses in new energies.