TOT Results/Outlook

[Tree]

http://www.total.com/en/media/news/press...ts-outlook

*2015 Output soars

*>$5 Billion impairments

*Dividend maintained

*Best performing Major in 2015; expects industry downgrades

*No FIDs in 2016

*Continue $10 Billion asset disposal 2015-2017

*Setting sites on 2020 and beyond

http://www.bloomberg.com/news/articles/2...o.headline

[jft310]

French company announces further cuts to costs and investment
Oil and gas producer will sell more assets such as pipelines
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Total SA became the latest major energy company to keep investor payouts, accepting that the industry risks credit-rating downgrades by maintaining dividends amid the worst oil crash in 30 years.
“Probably most of the industry will be downgraded,” Chief Financial Officer Patrick de la Chevardiere said Thursday at a press briefing in London. The impact on Total will be “very negligible” since the market has already priced in the higher cost of credit amid crude’s collapse, he said.
Oil producers including BP Plc and Royal Dutch Shell Plc have stuck doggedly to their dividends, cutting operating costs and investments to free up cash for shareholders as the price plunge dents earnings. Total was among several European oil and gas companies assigned a negative outlook by Standard & Poor’s this month as the market rout continued.
The French producer, which reported a 26 percent decline in fourth-quarter earnings on Thursday, kept its dividend unchanged from the third quarter at 61 euro cents a share and offered investors the option of taking the payout in stock discounted by 10 percent in a bid to conserve cash.
‘Strong’ Model
“We maintained the dividend because we are convinced that our business model is strong enough to support it,” the CFO said. He reiterated that Total plans to fund its dividend next year from the cash it generates pumping, refining and selling oil, without the need to take on debt or sell assets with crude at $60 a barrel.
Brent crude, the global benchmark, is currently trading at around $30 a barrel, more than 40 percent below its level a year ago. S&P sees Brent at $40 this year and $45 in 2017, the ratings company said Feb. 1 as it cut Shell’s credit rating and said Total, BP, Eni SpA, Repsol SA and Statoil ASA may follow suit.
Total said Thursday it will exceed a target to save $3 billion by 2017 compared with its 2014 cost base. It will reduce investment to $19 billion in 2016 from $23 billion last year. In September it planned to invest as much as $21 billion in 2016. For 2017, Total repeated a previous forecast to spend $17 billion to $19 billion.
Disposal Program
The company also reiterated a plan to sell $10 billion of assets in the three years through 2017 including $4 billion in 2016, having already sold $4 billion last year. Divestments may include pipelines and storage facilities, De la Chevardiere said. Acquisitions remain limited by the excessive valuations of target companies, he said.
Total maintained its goal to increase oil and gas production by 5 percent a year in the 2014 to 2019 period, saying the supply glut will be absorbed by 2020 as lower crude prices boost consumption.
“By 2020 you see there is a lack of production, which has to come from somewhere to match the demand,” the CFO said. “There will be a need for a better oil price to sustain the development of further projects.”
Before it's here, it's on the Bloomberg Terminal.

[katytrader]

At the very end of the TOT call's Q & A,  M. Pouyanne used Papua as a project in which TOT saw a long-term investment and expected that with few LNG projects likely to be started, the project would benefit from lower costs.   There was more verbiage, but for the life of me I could not get ckeditor to communicate with my notepad.

[KnowTheFacts]

At the very end of the TOT call's Q & A,  M. Pouyanne used Papua as a project in which TOT saw a long-term investment and expected that with few LNG projects likely to be started, the project would benefit from lower costs.   There was more verbiage, but for the life of me I could not get ckeditor to communicate with my notepad.

Oswald Clint - Sanford C. Bernstein Ltd.

Yes. Thank you very much. Oswald Clint at Sanford Bernstein. Slightly longer-term question but you mentioned the 2P reserve number and the focus for low breakeven oil projects. Can you say kind of what's in that 2P reserve bucket? What was the general average breakeven on the projects and how is that number falling away as we think about longer-term growth, longer-term competitive of Total?

And second question, you've been signing some LNG contracts, I guess recently in January with Indonesia, China, decent 15 years or so. Can you talk about what that's telling you about LNG demand and also what type of pricing is inherent within those plays? Thank you.

Patrick Pouyanné - Chairman & Chief Executive Officer

Laurent will prepare the answer to the question on the pricing. Laurent Vivier of Gas is in the room I think. So Laurent will give you the answer. First, I would like to say, by the way, and before Laurent is thinking to answer, to the right answer, that we are pleased to be able to expand our customer base in LNG. It's very important because LNG markets is shifting clearly from a producing – from a seller market to a buyer market. And so, for launching new projects like the project that we have in Papua New Guinea, which is a low cost project in terms of and very well positioned, we need to find new customers. And the efforts this is the focus of Laurent team is to identify new customers, to go beyond the traditional buyers in China and in Southeast Asia, and Laurent will give you some indication on the – on this type of market price. Laurent, you don't deliver the contract. You are not obliged to answer fully.

Laurent Vivier - President-Gas Division

Just to say that it's in fact contrary to some expectation in market, which is quite long, but it's still possible to secure those contract. They are very traditional contracts in terms of price formula. It's mostly oil-related at levels maybe slightly above than what has been done just before, and we've been able to put a bit of hurry up into it as well. It's very classical contracts, all related for, which on average for more than 90%.

[katytrader]

At the very end of the TOT call's Q & A,  M. Pouyanne used Papua as a project in which TOT saw a long-term investment and expected that with few LNG projects likely to be started, the project would benefit from lower costs.   There was more verbiage, but for the life of me I could not get ckeditor to communicate with my notepad.

Oswald Clint - Sanford C. Bernstein Ltd.

Yes. Thank you very much. Oswald Clint at Sanford Bernstein. Slightly longer-term question but you mentioned the 2P reserve number and the focus for low breakeven oil projects. Can you say kind of what's in that 2P reserve bucket? What was the general average breakeven on the projects and how is that number falling away as we think about longer-term growth, longer-term competitive of Total?

And second question, you've been signing some LNG contracts, I guess recently in January with Indonesia, China, decent 15 years or so. Can you talk about what that's telling you about LNG demand and also what type of pricing is inherent within those plays? Thank you.

Patrick Pouyanné - Chairman & Chief Executive Officer

Laurent will prepare the answer to the question on the pricing. Laurent Vivier of Gas is in the room I think. So Laurent will give you the answer. First, I would like to say, by the way, and before Laurent is thinking to answer, to the right answer, that we are pleased to be able to expand our customer base in LNG. It's very important because LNG markets is shifting clearly from a producing – from a seller market to a buyer market. And so, for launching new projects like the project that we have in Papua New Guinea, which is a low cost project in terms of and very well positioned, we need to find new customers. And the efforts this is the focus of Laurent team is to identify new customers, to go beyond the traditional buyers in China and in Southeast Asia, and Laurent will give you some indication on the – on this type of market price. Laurent, you don't deliver the contract. You are not obliged to answer fully.

Laurent Vivier - President-Gas Division

Just to say that it's in fact contrary to some expectation in market, which is quite long, but it's still possible to secure those contract. They are very traditional contracts in terms of price formula. It's mostly oil-related at levels maybe slightly above than what has been done just before, and we've been able to put a bit of hurry up into it as well. It's very classical contracts, all related for, which on average for more than 90%.

Good.  Now go the very end, last or penultimate page, for the paragraphs I referenced.....

[Putncalls]

Is this good? Or is this bad?

[Stavros]

Neither one Putz

It means they're in a hurry to finalize off take deals to reach FID on schedule in early 2017.

It is an excellent set of statements.

TOTAL and OSH have also repeatedly stated that number of LNG Trains and size will be determined in mid 2016 and substantial early work on the project will commence. In fact, early work to my opinion has already started.

The early work will be so substantial that IOC will have to draw from their credit facility NOOS and then pay it back after they get $2.5 Billion$ from TOTAL at certification in 4Q2016

[Putncalls]

I don't see the part where Total is in a hurry.

[Stavros]

You don't "get it" Putz

TOTAL is NOW lining up new LNG offtakers beyond their current sales volumes, despite the fact that Yamal is sold out but delayed and Yemen is shut down.

Why NOW?

Connect the dots, as some say (Dot . Dot . Dot . )

Sign up the LNG offtakers ... begin Papua LNG Project "early works" ... declare FID ... build the LNG Trains (perhaps 10-12 million tons per annum?) ... start up before the end of 2020 when these new offtake agreements replace many of those industry deals that JFT keeps reminding us will be expiring ... MAKE MONEY$

On top of that, O'Neill and Polye said they want TOTAL to be in a hurry .... implying "or else"

[Putncalls]

Everybody and their grandmother is working to sign up LNG off takers these days. The "off takers" want cheap short term contracts and the suppliers want long term contracts. I wouldn't want to mistake a frenzy for a hurry.