May 06, 2020

French giant Total is facing exceptional circumstances: the Covid-19 health crisis, which is affecting the world economy and creating major uncertainties, and the oil market crisis, with the sharp drop in oil prices since March. In an environment where prices fell by more than 30% on average during the first quarter, the Group’s cash flow decreased by 31% year-on-year to $4.5 billion, and adjusted net income was down 35% this quarter to $1.8 billion. Return on equity stood at 9.8% and Total maintained its financial strength with gearing at 21%.
In response to these crises, the Group announced an immediate action plan on March 23. The Group now anticipates 2020 production between 2.95 and 3 Mboe/d, a reduction of at least 5% from 2020 forecasts, reflecting the voluntary curtailment measures in Canada, the exceptional quotas announced by OPEC+, lower local demand for gas and the situation in Libya. In the Downstream, plant utilization rates and sales have been on average 50% below normal since mid-March, with uncertainty about the timing of a return to normal.
In this context, the action plan should be strengthened:
• Net investments further reduced to less than $14 billion for the year, a decrease of nearly 25% compared to the $18 billion announced in February 2020. Investments in low-carbon electricity will be maintained between $1.5 and $2 billion.
• Operating cost reduction increased to more than $1 billion, plus savings of more than $1 billion on energy costs.
• The Group strengthened its liquidity position in April by issuing $3 billion in bonds and drawing $6 billion in credit lines. In addition, in a 30 $/b environment, the Group anticipates an improvement in its working capital position of $1 billion by year-end 2020 compared to year-end 2019.
The anticipated gradual increase in demand linked to the end of the Covid-19 crisis may not bring a rapid resolution of the oil crisis given the time required to return inventories to normal levels. Total faces this period of economic and oil crisis with a low organic breakeven and a solid balance sheet. The group reacted to this new environment with an action plan, which has the objectives of preserving the value of its assets, maximizing the efficiency of its expenditures and positioning the Group in the best conditions to emerge strengthened from this period. All employees are mobilized in all the segments of the Group.
Total has therefore decided to reduce net investments by 25% to $14 billion this year. The new measures taken will allow the organic cash breakeven to remain below $25/b in 2020, thus confirming Total’s resilience.
(Source: Total)