Total SA (FP), Europe’s third-largest oil company, plans to sell as much as $20 billion in assets to raise cash for oil and gas projects.
Total said it would try to sell $15 billion to $20 billion of assets between 2012 and 2014 to cement “active portfolio management,” according to a statement. Chief Executive Officer Christophe de Margerie said the outlook for cash flow gave the company scope to increase dividends and invest in output.
Total has increased the pace of acquisitions and asset sales in recent years to shuffle its portfolio and raise production. The French explorer is following BP Plc (BP/) which has a target to sell $38 billion of assets by the end of 2013 and has completed about $32 billion so far. Total completed $15 billion of asset sales in 2010 and 2011, including in European refining capacity and shares in drugs maker Sanofi.
The French explorer has also pledged to step up and make “bolder” the search for oil and gas. This strategy has seen Total move into so-called frontier nations including French Guiana and Kenya, while continuing to invest in large production projects in Kazakhstan, Canada and Australia.
Total said today it expects to increase output an average of 3 percent a year from 2011 to 2015, compared with an earlier goal of 2.5 percent a year, according to a statement. Paris- based Total gave a longer-term target for the first time, saying production will reach about 3 million barrels of oil equivalent a day in 2017. This compares with 2.35 million barrels of oil equivalent last year.
“The production targets are a stretch,” said Stuart Joyner, an analyst at Investec Securities Ltd. in London. “It’s aggressive for a company with this portfolio and I wouldn’t be surprised to see them undershoot.”
Production fell 2 percent in the second quarter to 2.26 million barrels a day after a U.K. North Sea gas leak prompted the shutdown of the Elgin and Franklin platforms in March, while production in Nigeria and Yemen was also disrupted. Total said today it expects the field to start again by the end of the year.
“For the 3 million barrel a day target by 2017, you should note that 70 percent of the projects are either in production or in development,” said Patrick de la Chevardiere, Total’s chief financial officer, at an investor day in London. The company’s newer projects are more profitable than the rest of its portfolio, he said.
“Total’s bold exploration program is focused on high-risk, high-reward prospects, and new acreage has added to the potential for giant discoveries,” the company said. Total announced today it had acquired a 40 percent stake in the offshore Rovuma Basin in Mozambique from Petronas.
Total’s exploration permits in Angola’s Kwanza basin, Ivory Coast, Uruguay’s Block 14 and French Guiana are at the heart of the “mirror concept” of the Atlantic Ocean where geologists speculate reserves on either side of the South American and African coasts mirror each other, Total said today.
The French company plans to drill wells or prepare seismic studies on these permits next year and in 2014, according to today’s presentation. Another promising area is the foothills of Iraq, it said.
“They’ve really beefed up their exploration and are taking more risk than in the past,” said Iain Reid, an analyst at Jefferies Group Inc. in London. “The Mozambique acreage looks promising.”
The company, which plans to accelerate free cash flow growth between 2015 and 2017, said the restructuring of its refining and chemicals division that’s under way will add $650 million a year to net results by 2015. Refining profits are about $60 a ton at present, de la Chevardiere said.
The Iraqi government hasn’t taken action against Total after the company agreed to take exploration acreage in the country’s Kurdistan region, de la Chevardiere said.
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