Oil and gas major Total (EPA:FP) posted a massive decline in quarterly profits on Tuesday (May 5) in the wake of historically low crude prices. However, it stopped short of cutting its dividend despite what it described as “exceptional circumstances” due to demand declines caused by the coronavirus or Covid-19 global pandemic.
The French company posted a first quarter net profit decline of 35% to $1.8 billion, down from $2.8 billion recorded over the same quarter last year. Patrick Pouyanne, CEO of Total, said: “The Group is facing exceptional circumstances. The Covid-19 health crisis is affecting the world economy and creating major uncertainties, and the oil market crisis, with the sharp drop in oil prices since March.”
Major crude markets are in temporary lockdowns with factories shut, airlines grounded and people staying at home. Both major oil futures contracts – Brent and WTI – are currently trading 60% lower since the start of the year, with the latter contract registering negative prices on April 20.
Total said its oil and gas production rose by 5% on an annualized basis to 3.09 million barrels of oil equivalent a day (boepd) partly boosted by projects in the UK, Nigeria, Norway and Australia.
However, the company expects production to come in between 2.95–3 million boepd for 2020, a 5% annualized reduction due to curtailment measures in Canada, Organization of the Petroleum Exporting Countries’ (OPEC) exceptional quotas, disruption in Libya and lower demand.
Total will also institute cost cuts across the board with CEO Pouyanne taking a 25% fixed salary pay cut for the remainder of the year. However, the French major stopped short of cutting its dividend, maintaining it at €0.66 ($0.72) per share.
It also proposed an option that shareholders receive 2019’s final dividend in cash or in new shares of the company with a discount, subject to approval at its shareholders’ meeting on May 29.
Total’s decision follows similar moves to maintain dividends by rivals BP, ExxonMobil XOM and Chevron CVX . But Royal Dutch Shell slashed its dividend to shareholders for the first time since World War II on April 30, and Norway’s Equinor did likewise even before the publication of its financials which are due on May 7.
Total also reaffirmed plans to cut its emissions with the objective of being carbon neutral from its operations and energy products in Europe by 2050. The company and the sector as whole is coming under pressure to meet climate objectives.
In April, a group of 11 European investors led by asset manager Meeschaert, currently representing just under 1.5% of Total’s capital, said they planned to present a resolution at the company’s shareholders’ meeting on Paris Climate Agreement commitments.
I am a UK-based oil & gas sector analyst and business news editor/writer with over 20 years of experience in the financial and trade press. I have worked on all major media platforms – print, newswire, web and broadcast. At various points in my career, I have been an OPEC, Bank of England and UK Office for National Statistics correspondent. Over the years, I have provided wide-ranging oil & gas sector commentary, including pricing, supply scenarios, E&P infrastructure, corporations’ financials and exploration data. I am a lively commentator on ‘crude’ matters for publications and broadcasting outlets including CNBC Europe, BBC Radio, Asian and Middle Eastern networks, via my own website, Forbes and various other publications. My oil market commentary has a partial supply-side bias based on a belief that the risk premium is often given gratuitous, somewhat convenient, prominence by cheeky souls who handle quite a few paper barrels but have probably never been to a tanker terminal or the receiving end of a pipeline. Yet having done both, I pragmatically accept paper barrels [or should we say ‘e-barrels’] are not going anywhere, anytime soon!