Total takes $6.5 billion impairment, cuts costs

French energy company Total will cut investment and jobs this year and accelerate its asset sales programme after taking a $6.5 billion write-down in the fourth quarter because of weak oil prices.

Like many of its oil producing rivals, the Paris-based firm was forced to write down the value of North American oil sands and shale assets as well as European refineries as a halving in crude prices since June and sluggish demand took their toll.

Total said it would increase cuts to operational costs to $1.2 billion this year, above a previous target of $800 million. It will reduce organic investments by up to 13 percent to $23-24 billion and spending 30 percent less on exploration work.

Patrick de La Chevardiere, chief financial officer said the oil major’s objective was to cut its breakeven point by $40 per barrel to about $70.

Oil companies across the globe, including Shell and BP, have announced billions of dollars of capital cost cuts to strengthen their books whilst facing lower profits.

The budget cuts also signaled a more long-term change in its exploration strategy for Total, whose long-serving Chief Executive Christophe de Margerie died in a plane crash in Moscow last October.

New Chief Executive Patrick Pouyanne said the cut to the exploration budget, to $1.9 billion in 2015, was in part due to the current low-price but driven more by a desire to revamp the process after having failed to return any major oil find in recent years.

Like its peers, Total maintained its shareholder payouts with a fourth-quarter dividend of 0.61 euros a share. It also expects to sell $5 billion in assets this year.

Total said some 2,000 jobs will go globally by the end of the year, mainly through natural attrition as it freezes hiring. The group had 99,000 employees at end-2013.

The company’s net adjusted profit, which fell 17 percent to $2.8 billion in the quarter compared with the same period a year ago, came in higher than analysts had expected however. Revenue fell 19 percent to $52.5 billion.

Analysts said the better performance was due to lower tax payments and stronger results in the refining and chemicals branch, with the group reaching its 2015 target of return on average capital employed (ROACE) a year earlier than forecast, at 15 percent in 2014 from nine percent in 2013.

Oil and gas production fell 2 percent in the fourth quarter to 2.229 million barrels of oil equivalent per day, mainly due to the expiration of the ADCO licence in Abu Dhabi, the capital of the United Arab Emirates, which Total renewed in 2015. Production is expected to rise by more than eight percent in 2015, although the start-up of the Laggan-Tormore project in the North Sea was delayed to the third quarter from the first three months