Total to Start "Soft Landing" from Years of Record Capital Spending
Total will start a "soft landing" next year to scale back heavy capital spending while keeping long-term output targets and generating greater cash flow, the French oil major said.
Taking advantage of strong oil prices, now around $109 a barrel, Total has made the highest investments in its history over the past three years, drilling in areas that are hard and costly to explore.
"We've been through the past years developing a strategy based on relaunching an important investment programme. We considered that Total was lacking reserves and production," Chief Executive Christophe de Margerie said.
He told the group's annual investor day conference in London that this had been reducing Total's free cash flow before divestments and added that the company needed to return to a capital spending policy more in line with its size.
"I call it a soft landing," De Margerie said.
The group's organic capital expenditure between 2015 and 2017 will fall to $24-$25 billion per year, down from around $28 billion in 2013, chief financial officer Patrick de La Chevardiere said.
The group confirmed an oil and gas production target of 2.6 million barrels of oil equivalent per day (boepd) in 2015, and a potential for 3 million boepd in output in 2017.
Output slid by 2 % to 2.3 million boepd last year, as Total struggled with a gas leak at the Elgin field in the North Sea, but the group posted its first quarterly rise in production in three years earlier this year.
Total is counting on projects such as the giant Kashagan gas field in Kazakhstan, which started production earlier this month, to meet its production target.
The Ekofisk South project in Norway and Laggan-Tormore off the coast of the Shetland Islands in the North Sea, are also set to start producing next year.
In parallel, its exploration programme continues, with more than 15-high-potential wells planned by the end of 2014, in places such as the Gulf of Mexico, Iraq, Brazil and Angola, the group said.