PARIS: French energy giant Total said on Thursday it will sell assets worth around $5 billion mostly from its upstream exploration and production business as it seeks to focus on low breakeven projects that can withstand low oil prices.
The company reported a 19% drop in adjusted net profit in the second quarter at 2.9 billion compared with the same period last year which it attributed to a combination of unfavourable market factors.
These include low oil prices compared with the second quarter of 2018, down 7%, a sharp fall in gas prices, while its refining margin tumbled.
“Markets remained volatile with Brent averaging $69 per barrel in the second quarter, an increase of 9% compared to the previous quarter but natural gas prices were down 36% in Europe and 26% in Asia,” Total Chairman and Chief Executive Officer Patrick Pouyanne said.
The company, which has carried out a spree of acquisitions and expansion particularly in the gas and electricity market under Pouyanne, said it was preparing its future by focusing on its core strength in the gas segment and deep offshore.
The strategy would be complemented by the divestment of assets that only break even at high oil and gas prices, such as the recent sale of mature assets in the UK North Sea, Total said in a statement.
“This active portfolio management policy will continue with the sale of $5 billion of assets over the 2019-20 period, the majority coming from Exploration and Production,” Pouyanne said.
Total said the global oil environment remains volatile at the start of the third quarter with uncertainty about demand growth.
However, its European refining margins, while still volatile, increased at the start of the third quarter and its downstream business should benefit from restarting the Grandpuits refinery in France and the Leuna refinery in Germany.
Total said that in this context, it was maintaining spending discipline in 2019 with an organic investment target of around $14 billion.
The group’s oil and gas production growth should surpass 9% this year thanks to the ramp-up of projects started in 2018 and the launch of the Kaombo Sul project in Angola, Culzean in the Britain’s North Sea, as well as the upcoming Johan Sverdrup in Norway and Iara 1 in Brazil, it said.
Total increased its second interim dividend by 3.1% compared to last year to 0.66 euros per share and bought back $760 million of its shares as part of its target to buy back $1.5 billion worth of shares in 2019.