Total announces plans to sell $10 billion in assets by 2017

HOUSTON — French energy giant Total SA will sell $10 billion of assets from 2015 to 2017, the company said, as part of a broader strategy designed to promote financial discipline in the company.

Total leaders, speaking to analysts Monday, also said that by 2017, it will have reduced its capital expenditures to $25 billion — down from $26 billion this year and $28 billion in 2013.

“On top of delivering our projects, controlling capex is the single most important challenge we face at Total,” said Patrick de la Chevardière, the company’s chief financial officer.

Executives emphasized that cost-reductions would be implemented company-wide.

“We need to make this company in a much stronger position in the year 2017 and after,” said CEO Christophe de Margerie

The announcement comes on the heals of a previous goal — which Total says it’s already achieved — of selling at least $15 billion in assets from 2012 to 2014.

The company also hopes to achieve $4 billion in cumulative savings from 2015 to 2017 from reduced operating expenses. Those cost-cutting efforts will begin next year, company officials said.

The move is part of a broader strategy company officials outlined that focused on cost reduction and capital discipline as it moves beyond what it calls an “intensive investment” phase and is now seeking ways to improve cash flow.

Total’s U.S. exploration and production portfolio includes several non-operate assets, including partnerships with Chesapeake Energy in the Barnett and Utica shales as well stakes in projects operated by Cobalt and Petrobras in the Gulf of Mexico.

Total and its subsidiaries have more than 5,500 employees in the U.S.

The company also announced that its 2015 production totals would be about 10 percent less than its previously-announced projections of about 2.6 million barrels of oil equivalent for per day.

“Some things have changed and not always for the better, but we are adjusting as we always do,” de Margerie said.

Total has a stake in the as Kashagan oil field project in Kazakhstan as well as the Angola LNG project, both of which are facing delays.

“When you have big, complex projects, it’s easy for them to struggle to get going,” said Brian Youngberg, an analyst at financial services firm Edward Jones. “Total’s had more issues with that than some of their peers. Is it because of their own problems or just bad luck? Probably a combination of both.”

Total’s retreat on spending follows that of other major integrated oil companies.

Earlier this year, Royal Dutch Shell CEO Ben van Beurden announced plans to reduce upstream North and South America spending by $10 billion. It said it hopes to divest $15 billion in assets over the course of 2014 and 2015.

BP also announced plans this year to sell $10 billion in assets by the end of 2015.

“These companies have a history of overspending and not showing the growth,” Youngberg said. “I think Total is trying to show more discipline. Basically these companies need to shrink these portfolios and right-size.”

He said Total is unlikely to try to shed U.S. assets. Its assets in the Canadian oil sands as well as Africa could be likely contenders for divestiture, he said.

At a forum in Houston earlier this year, de Margerie was among the energy industry leaders who bemoaned exploration and production costs that had spiraled out of control in recent yeas and highlighted the need for restrained spending.

“The capital intensity of this industry is heading in a direction that’s not sustainable,” said Lars Christian Bacher, executive vice president for development and production at Norwegian energy company Statoil, at the IHS CERAWeek summit in Houston in March.

Arnaud Breuillac, Total’s president of exploration and production, said Monday company will utilize stricter selection criteria when choosing new projects to pursue in the future.

He also pointed to 15 major projects expected to come online by 2017 that will increase production for the company by more than 600,000 barrels of oil equivalent per day.

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