Downstream strength enables France’s Total to exceed expectations
2/11/2016 12:00:00 AM
By Bate Felix and Karolin Schaps
PARIS/LONDON, Feb 11 (Reuters) -- France's Total beat quarterly earnings expectations powered by high production and refining margins on Thursday, but said it plans fresh spending cuts in response to one of the worst market downturns in a decade.
Plunging crude prices have forced energy companies to cut costs, jobs and spending and delay projects, and Total pledged more this year although jobs are not to be cut.
Total said it plans savings of $2.4 billion, rising to more than $3 billion in 2017, and capital spending of around $19 billion, down more than 15% from 2015.
Total will also look to sell $4 billion in assets, although chief financial officer Patrick de La Chevardiere said with oil at $30/bbl selling upstream assets at a reasonable price could be difficult.
"This is not a garage sale," he said. "If we cannot obtain a reasonable price, we cannot sell."
Total last year boosted upstream production with the start of nine projects. Oil and gas output in the fourth quarter rose 5.5% to 2.352 million bpd of oil equivalent.
It also saw high margins in refining and chemicals and a strong performance in its retail and lubricant businesses.
Total fared better than many peers in the quarter, as its extensive downstream business benefited from weak oil prices.
That helped curb a fall in net adjusted income in the last three months of 2015. It fell 26% to $2.1 billion but beat forecasts, as analysts polled by Reuters had expected a profit of $1.93 billion.
"We are limiting some brownfield works. We are limiting the number of contractors working for us, not of our employees," de La Chevardiere said.
Total forecast production would grow by 4% in 2016 and said it planned five major start-ups.
However, stubbornly low oil prices mean the sector is braced for downgrades by debt rating agencies, de La Chevardiere said.
"The overall trend for the industry is a negative outlook. Probably most of the industry will be downgraded as they already downgraded Shell," he said, adding that a downgrade would have a very negligible impact on Total's business.
Total's shares were down 1.9% at 35.80 euros by 1030 GMT, while the European oil and gas sector index was 3.0% lower.
(Editing by James Regan and Jason Neely)
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