France’s Total, which posted a 16 per cent jumps in fourth-quarter profit on Thursday as it grew production and lowered breakeven price, is looking for opportunities to buy struggling assets from rivals.
The oil major made a net profit of US$2.4 billion in the last three months of 2016, compared with $2.08 billion in the year-ago period. Its full year profit was down 17 per cent to $9.42 billion. Production growth and lower costs partially offset the 19 per cent decrease in hydrocarbon prices and 30 per cent decrease in refining margins, the company said in a statement.
“In this difficult environment, the group demonstrated its resilience by generating adjusted net income of $8.3 billion and had the highest profitability among the majors due to the strength of its integrated model and commitment of its teams to reduce the breakeven,” chief executive officer Patrick Pouyanne said.
Total made cost savings of $2.8 billion in 2016, exceeding the objective of $2.4 billion. Production costs were reduced to $5.9 /boe in 2016, compared to $9.9$/boe in 2014. It targeted 2017 cost savings at $3.5 billion.
In the Upstream, Total strengthened its position in the Middle East by entering the Al Shaheen field in Qatar, and in the US with the acquisition of shale gas assets, Pouyanne said.
The company is now preparing for future growth with the signing of major deals in Brazil with Petrobras, in Uganda and in Iran on the giant South Pars 11 project. Total said it renewed its reserves with a replacement rate of 136 per cent at constant prices and delivered promising exploration results, with two major discoveries in the US (North Platte) and Nigeria (Owowo).
Its $10 billion asset sale program is around 80 per cent complete following the closing of the sale of specialty chemicals affiliate Atotech for $3.5 billion, which contributed to Total’s financial strength, the French major said.
Total rewarded shareholders with an increased fourth-quarter dividend of 0.62 euros per share, compared with 0.61 in the previous three quarters, as adjusted net profits rose 16 percent to $2.4 billion in the quarter compared with Q4 2015.
It said the increased divided demonstrates the company’s confidence in the Total’s results and balance sheet as well as its prospects for cash growth.
On back of a strong balance sheet, Puoyanne said the company is hunting for opportunities to buy assets from struggling rivals. Total plans to make final investment decisions on about 10 projects within the next 18 months, with expected investments for 2017 between $16 billion and $17 billion which will include resource acquisitions.
"We are in a field of opportunities. We have a good balance sheet and financial means that others do not have," Reuters quoted Pouyanne telling reporters in Paris.
"After two years of very low prices, there are companies around the world that have good assets but are struggling. It is left to us to choose good assets that are of interest to us," he added.
Pouyanne told reporters that Total will make a final investment decision on the $2 billion gas project to develop South Pars 11 in Iran by the summer, but the decision hinges on the renewal of U.S. sanctions waivers.
He said South Pars 11 will be among a couple of projects to be approved by the company to start by the summer, if nothing is modified with regards to the sanctions.
"There are two executive orders that are supposed to be renewed before summer," Reuters quoted Pouyanne to have said, explaining that the administration of previous U.S. President Barack Obama had signed waivers suspending the sanctions.
"These are supposed to last about 18 months. So President Trump will have to, or not, renew these sanction waivers," Pouyanne said.