Total to sell $5bn of assets to protect against low oil prices

French energy major Total will sell $5bn of assets by the end of 2020 as it looks to concentrate on businesses that can better withstand the low energy prices which hit its second-quarter results.

The planned sales — mostly in exploration and production — were announced as the company said its second-quarter adjusted net income had fallen by 19 per cent over the previous year to $2.9bn, hit by falling energy prices and refining margins. The figure was slightly below the $2.98 billion expected by analysts polled by Bloomberg.

“Markets remained volatile with Brent averaging $69 per barrel in the second quarter, an increase of 9 per cent compared to the previous quarter, but natural gas prices were down 36 per cent in Europe and 26 per cent in Asia,” said chief executive Patrick Pouyanné in a statement.

Total’s “active portfolio management policy will continue with the sale of $5bn of assets over the 2019-20 period, the majority coming from exploration and production,” added Mr Pouyanné.

Total still threw off large amounts of free cash despite the challenging environment — which saw refining margins fell by 16 per cent — generating $7.2bn in the second quarter, a year-on-year increase of 6 per cent.

The planned sales follow an agreement announced earlier this month to sell a pool of North Sea oil assets, acquired as part of its 2017 deal for Maersk Oil, for $635m. The sales also come in the wake of an acquisition spree for Total under Mr Pouyanné, including most recently agreeing in May to buy Anadarko’s operations in Africa for a net $8bn.

Total is trying to push down its break-even point, the level above which it can finance its current investments. The group’s current break-even point is $25 a barrel of oil and the level at which it can both finance investments and continue paying a dividend is $50.

Mr Pouyanné has previously said that Total can weather a low oil price more easily than smaller rivals, giving the company an edge in acquisitions and investments.

In the face of geopolitical uncertainty, Total said it will maintain “its spending discipline in 2019 with an organic investment target of around $14bn.”

Total also said on Thursday that its dividend will be increased by 3.1 per cent in 2019, in line with the target increase of 10% over the period 2018-2020, and it will buy back $1.5bn of shares in 2019 as part of its $5bn share buyback program over the 2018-2020 period.

Source: financial times