French oil giant Total chops spending, ends share buybacks

Agence France-Presse
French oil giant Total chops spending, ends share buybacks
Total says it has adopted an action plan to deal with the plummeting price of oil amid the novel coronavirus outbreak

PARIS, France – French oil major Total said on Monday, March 23, it would slash investment spending by a fifth, cut an additional half billion dollars in costs, and halt share buybacks as it seeks to deal with a plunge in the price of crude because of the coronavirus outbreak.

To deal with the price of oil, which plummeted by more than half to under $30 per barrel, the firm said it had adopted an action plan.

The plan includes cutting capital spending by “more than $3 billion, ie. more than 20%, reducing 2020 net investments to less than $15 billion.”

It announced “$800 million of savings in 2020 on operating costs compared to 2019,” up from $300 million previously announced.

Total also announced it would suspend its share buyback program, a method used by many firms to return funds to shareholders.

It had planned to repurchase $2 billion of its shares in 2020 and announced it bought back $550 million in the first two months.

Officials around the world have imposed confinement measures on their citizens in an attempt to slow the spread of the coronavirus, leading to a slump in demand for oil.

Meanwhile, Russia and Saudi Arabia have launched a price war and stepped up production, adding further downward pressure to prices.

Total’s chief executive Patrick Pouyanne said that global demand for oil was likely to drop by 6 million barrels per day while an additional 3 billion to 4 billion barrels per day were likely to flood the market.

“This explains why the price of oil has collapsed,” Pouyanne said in a video message to Total staff on the company’s website.

He said Total was in a much better position than the last time oil prices collapsed in 2014, when its breakeven point for investments was over $100 barrel.

Today, it “is under $25 a barrel, so we still have some leeway.”

In addition, production costs have been squeezed down to $5 from $10, said Pouyanne.

The firm’s debt level is half of what it was in 2014 as well, he added. – Rappler.com

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