PARIS, Sept. 23 (UPI) — French energy company Total said Wednesday it was cutting its operating expenses by 50 percent for a 2017 spending drop of $3 billion.
“Total is executing its plan to reduce capital expenditures to $23 billion – $24 billion in 2015, from the peak of $28 billion in 2013,” the company said in a statement.
Investments next year will be down to around $20 billion next year before returning to what the company said would be a sustainable level of around $18 billion from 2017 onward.
Energy companies are scaling back investments in new exploration and production in response to the low price of crude oil. Brent crude oil priced at around $49 per barrel is nearly 50 percent lower than this date in 2014.
While bracing for a prolonged slump in crude oil prices, the French supermajor added it was one of the first to start slashing costs in 2014 when a bear market emerged. In February, the company said it began efforts to achieve around $1.2 billion in savings, of which 66 percent had been achieved by the end of the second quarter.
“The group is further increasing its operating expense reduction target by 50 percent from $2 billion to $3 billion by 2017,” the company said.
In July, Total attributed cost-cutting to only modest declines in profits, which were down 4 percent to $2.97 billion in the second quarter. Revenue for Total was down 29 percent to $44.7 billion.
In August, Total Chief Financial Officer Patrick de la Chevardiere said the $905 million sale of a stake in the St. Fergus gas terminal in the North Sea was part of a “strategy of active portfolio management.”
On the exploration and production side of operations, the company said output would increase at an average rate of 6 percent through 2017. About 75 percent of total spending would focus on exploration and production.
“The main drivers for production growth include twenty major start-ups, eight of which are in 2015, and increasing production efficiency,” the company said.
The company said Wednesday it could continue to cover its dividend payments by 2017 with oil priced at $60 per barrel.
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