Total Production Up, Gas Down
French major Total produced 1% less gas in Q4 2018 than in the same quarter of 2017 but liquids output rose, giving a net gain on hydrocarbon production of a tenth to 2.876mn barrels of oil equivalent (boe)/d. That, and higher prices, helped it towards an operating income for Q4 2018 of $3.2bn, up by a tenth on the same period 2017.
For this year, it is targeting cost reductions of $4.7bn, projected net investments of $15-16bn and operating expenses of $5.5/boe.
And it will improve reporting transparency with a new division this year. Integrated Gas, Renewables & Power will combine the Gas, Renewables & Power segment with the upstream gas and LNG activities now reported within the Exploration & Production segment.
Upstream made an adjusted operating income of $2.48bn, up 38% on Q4 2017. Over the year, dated Brent averaged $71/b, compared with $54/b in 2017. Gas, power and renewables though was down 24% to $176mn.
Total received $2.101bn last quarter mostly from the sale of a 4% interest in the Ichthys project in Australia and the sale of its share of the LNG re-gas terminal at Dunkirk, northern France. But the consolidation of Direct Energie and the LNG business of Engie was mainly responsible for the negative cash flow from operations in Q4 2018: it lost $41mn, compared with a gain of $667mn in Q4 2017.
The production gain came mostly from start-ups and ramp-ups on new projects. The integration of Maersk Oil, and the purchase of an additional 0.5% of Novatek, the main investor in Yamal LNG, were partly offset by the expiration of the Mahakam permit in Indonesia at the end of 2017 and the sales of Visund in Norway and Rabi in Gabon. Another 4% was lost through field declines and PSC price effects.
Total also reported a return on average capital employed close to 12%, which it said was the highest among the majors, and a pre-dividend breakeven below $30/b.
CEO Patrick Pouyanne said: "These excellent results reflect the strong growth of more than 8% for the Group’s hydrocarbon production, which reached a record level of 2.8mn boe/d in 2018 and led to a 71% increase in Exploration & Production’s adjusted net operating income. The year was highlighted by the start-up of Ichthys in Australia, Yamal LNG in Russia, deep-water projects Kaombo North in Angola and Egina in Nigeria, as well as the counter-cyclical acquisitions of Maersk Oil and new offshore licenses in the UAE."
In addition, Total maintained its financial discipline. Net investments were $15.6bn in 2018, in line with its objective, and $4.2bn in cost reduction was achieved. Debt-adjusted cash flow (DACF) was $26bn in 2018, driven largely by the 31% increase in cash flow from upstream. Its gearing ratio was "solid" at 15.5%, below the target limit of 20%.
Total is also continuing to expand along the value chain of integrated gas and low-carbon electricity, Pouyanne said. With its acquisition of Engie’s LNG assets Total is the second largest publicly-traded player in the LNG business, and its position will be strengthened with the 2019 start-up of the Cameron LNG project. In addition, Total accelerated its growth in low-carbon electricity, notably with the acquisition of Direct Energie. Refining reliability helped the downstream business to generate $6.5bn of cash flow and profitability of more than 25%.