Total Production Grows, Plans To Cut Capital Expenditures, Investments

(RTTNews) - Shares of Total SA (TTA.L, TTFNF.PK, TOT) were gaining around 2 percent in Paris on Wednesday after the French oil and gas giant reported higher production for first half, expecting further production growth until 2019. The company also plans to reduce capital expenditures and investments, and increased Opex reduction target.

Chief Executive Officer Patrick Pouyanné will present Total's Strategy & Outlook to the financial community today.

Total noted that in the first half, it achieved a production increase of 11 percent from last year. Production is planned to grow by an average of 6 to 7 percent per year between 2014 and 2017 and by an average of 5 percent per year between 2014 and 2019. The company attributed the production growth mainly to twenty major start-ups, eight of which are in 2015, and increasing production efficiency.

Further, Total said it is executing its plan to reduce capital expenditures to $23 billion to $24 billion in 2015, from the peak of $28 billion in 2013. The company will further reduce investment down to $20 billion to $21 billion in 2016, before returning to a sustainable level of $17 billion to $19 billion from 2017 onwards.

Total is further increasing its Opex reduction target by 50 percent to $3 billion by 2017 from $2 billion, leveraging the momentum from its cost saving program results and taking into account future cost deflation.

In 2014, Total had launched a global cost reduction program. In February 2015, as part of a robust response to lower oil prices, the company reinforced the program to achieve $1.2 billion savings in 2015. At the end of the first half 2015, the company has reached 66 percent of the annual target.

Total noted that capital discipline, further Opex reduction and growing production will deliver improving cash flows. The company confirmed that organic free cash flow will cover the dividend by 2017 at $60/b.

Further, Total said it is committed to its oil and gas integrated business model and plans to allocate its capital employed 75 percent to Upstream and 25 percent to Downstream.

The company also plans to invest Capex of around $500 million per year to build profitable businesses in new energies.

In Paris, Total shares were trading at 40.61 euros, up 2.14 percent.